Strategic investing plays a key role in reaching your financial objectives over the long term, and index funds like those from Vanguard can be great tools to support you along the way. Within the array of investment opportunities, the Vanguard Total Stock Market ETF (VTI) and the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) are popular selections. This article offers an in-depth analysis of VTI and VTSAX to assist doctors and other healthcare professionals in selecting the option that aligns best with your personal investment approach.
Understanding VTI & VTSAX
VTI and VTSAX are two popular investment options offered by Vanguard. But what exactly do they represent? In simple terms, both aim to track the overall performance of the U.S. stock market. Let’s break down each option to understand how they work.
Vanguard Total Stock Market ETF (VTI)
VTI is an exchange-traded fund (ETF) designed to track the performance of the CRSP U.S. Total Market Index, representing the entire U.S. stock market. It includes a diversified portfolio of stocks across all sectors and market capitalizations. The key feature of VTI is its flexibility—it can be bought and sold like a stock throughout the trading day, offering real-time pricing. This makes it suitable for investors who prefer active trading.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
VTSAX is a mutual fund that also aims to replicate the performance of the CRSP U.S. Total Market Index. However, unlike VTI, it trades only once per day after the market closes, based on the fund’s net asset value (NAV). It requires a minimum initial investment of $3,000 and is suitable for a long-term, passive investment strategy.
Key Differences Between VTI & VTSAX
We’ve explored what VTI and VTSAX offer individually. Now, let’s delve into the key distinctions between these two popular Vanguard funds so you can decide which one aligns better with your investment goals and preferences.
Expense Ratios
One of the most significant factors in investment returns is the expense ratio. Both VTI and VTSAX boast very low expense ratios, but there is a slight difference:
| Fund | Expense Ratio |
| VTI | 0.03% |
| VTSAX | 0.04% |
While the difference might seem negligible, over a long period of time, even a 0.01% difference can impact your returns due to compounding effects.
Minimum Investment Requirements
VTI can be accessed with minimal investment, as you only need enough money to purchase one share. The market price fluctuates, but as of this article’s publishing, the cost of a share is just over $260. In contrast, VTSAX requires a minimum initial investment of $3,000, which might be a barrier for some new investors.
| Fund | Minimum Investment |
| VTI | Price of one share |
| VTSAX | $3,000 |
This makes VTI more accessible, especially for those just starting their investment journey.
Trading & Liquidity
Another key difference lies in how these funds are traded:
- VTI: As an ETF, VTI trades throughout the day like a stock, offering real-time pricing. This is beneficial for investors who want the flexibility to trade during market hours and potentially capitalize on intraday price movements.
- VTSAX: As a mutual fund, VTSAX trades only once at the end of the day at the cost of net asset value (NAV), which reflects the closing prices of its underlying holdings. This provides the same price to all investors on that day, which can be appealing for long-term investors who prefer a buy-and-hold strategy and don’t want to monitor the market constantly.
Tax Efficiency
Historically, ETFs typically offered better tax efficiency compared to mutual funds. However, Vanguard has employed an innovative technique for ETFs and their mutual fund counterparts that minimizes capital gains distributions, making both VTI and VTSAX tax-efficient options for investors. This is important because lower capital gains distributions translate to less taxable income.
Similarities Between VTI & VTSAX
While VTI and VTSAX have some key differences, they also share many core features that make them attractive investment options. Let’s explore these similarities to understand why both funds remain popular choices for investors.
Market Exposure
Both VTI and VTSAX provide extensive exposure to the U.S. stock market by tracking the CRSP U.S. Total Market Index. This index includes thousands of stocks from various sectors, ensuring broad diversification.
Performance
Historically, the performance of VTI and VTSAX has been nearly identical, as both track the same index. Here are their average annual returns as of the most recent data:
| Time Period | VTI | VTSAX |
| 1-year | 22.38% | 22.36% |
| 3-year | 6.22% | 6.20% |
| 5-year | 12.34% | 12.34% |
| 10-year | 11.71% | 11.76% |
Dividend Yields
Both funds distribute dividends derived from the earnings of the underlying stocks. At the time of this article’s publishing, the 30-day SEC yield is quite comparable:
| Fund | 30-Day SEC Yield |
| VTI | 1.35% |
| VTSAX | 1.34% |
This similarity indicates investors could potentially see similar results across these two funds.
Deciding Factors for Investors
After understanding the key similarities and differences between VTI and VTSAX, the next step is to determine which fund aligns better with your investment goals and preferences. Here are some key factors to consider when making your decision.
Investment Goals & Strategies
Your choice between VTI and VTSAX should align with your investment strategy. If you prefer active trading and need the flexibility to buy or sell at any point during the trading day, VTI is the better option. Conversely, if you favor a more passive approach, where you invest and let your money grow without frequent trades, VTSAX might be more suitable.
Accessibility & Convenience
For new investors or those with limited funds, VTI’s low barrier to entry—the fact that you just need enough to buy one share—makes it an attractive choice. Conversely, for investors with a longer-term perspective who prefer a more hands-off approach and are able to meet the minimum investment, VTSAX may be a better fit. In terms of convenience, both VTI and VTSAX can be suitable for automatic investment plans offered by many brokerage platforms. This allows you to set up regular contributions without having to manually place trades.
The Bottom Line: Choosing the Right Investment for Your Goals
Both VTI and VTSAX are excellent choices for broad market exposure with low costs and strong historical performance. The decision between the two ultimately depends on your investment style, financial situation, and long-term goals. By understanding the nuances of each fund, you can make an informed choice that aligns with your strategy and helps you achieve your financial objectives. Invest wisely, and consider consulting with a financial advisor to ensure that your investment choices align with your overall financial plan.
Additional Investment Fund Resources
Want to learn more about various investment fund options? Look at the other articles in this series for more information:
- Choosing Between VOO & SPY for Your Portfolio
- VMRXX vs. VMFXX — Picking the Best Vanguard Money Market Fund
- Why You Should Consider VUSXX
- QQQ or QQQm—Choosing the Best Nasdaq-100 Fund
- What Are the Different Types of Index Funds?
- A Comprehensive Guide to Fidelity Mutual Funds
- VFIAX vs. VOO – Which Index Fund Is Right For You?
- FSKAX or VTSAX? Choosing the Right Index Fund
- Why You Should Consider VTSAX
- What You Need to Know About FZROX & Other Zero-Fee Funds
- Is FSKAX the Right Fidelity Fund For You?
- FSKAX or FZROX? Choosing the Right Fidelity Fund
- Assessing the Value of the Vanguard S&P 500 ETF (VOO)
- FXAIX or VOO? Choosing the Right Index Fund
- An Introduction to the Fidelity 500 Index Fund (FXAIX)
The information provided in this blog post is for general informational purposes only and should not be construed as financial advice. For specific financial counsel on investments, we strongly recommend seeking the guidance of a qualified expert.
