Choosing the right index fund can be crucial for doctors and healthcare professionals looking to build a strong investment portfolio. Both the Vanguard Total Stock Market Index Fund (VTSAX) and Vanguard 500 Index Fund Admiral Shares (VFIAX) offer exposure to different segments of the U.S. market and are popular options for long-term investors. This article explores their key differences to help you decide which aligns best with your investment goals.
Understanding VTSAX & VFIAX
VTSAX and VFIAX are two of Vanguard‘s most popular index funds, offering investors low-cost exposure to the stock market. While both track the U.S. stock market, they differ in scope.
VTSAX Overview
VTSAX aims to track the performance of the CRSP U.S. Total Market Index—a widely recognized benchmark used for its stock index funds and ETFs—offering exposure to the entire U.S. stock market, including small, mid, and large-cap stocks. VTSAX holds thousands of stocks, providing broad diversification across various sectors and market capitalizations.
VFIAX Overview
VFIAX, on the other hand, tracks the S&P 500 index, focusing exclusively on large-cap stocks. Comprised of hundreds of stocks, this fund represents some of the largest and most-established companies in the U.S. While it offers less diversification compared to VTSAX, its focus on large-cap stocks can provide stability and reduced volatility.
| Fund | Number of Holdings | Target Index | Market Capitalization Coverage |
| VTSAX | 3,719 | CRSP US Total Market Index | Small, Mid, and Large-Cap Stocks |
| VFIAX | 504 | S&P 500 index | Large-Cap Stocks |
Key Differences Between VTSAX & VFIAX
Choosing between VTSAX and VFIAX can be a tough call for investors. While both are low-cost Vanguard index funds, they do have differences.
Diversification
One of the primary differences between VTSAX and VFIAX is the level of diversification. VTSAX holds thousands of stocks across all market capitalizations, which provides extensive exposure to the entire U.S. stock market—compared to VFIAX’s half-thousand number of stocks. This broad diversification can help mitigate risks associated with specific sectors or individual stocks.
VFIAX, however, is more concentrated, focusing solely on large-cap stocks. While this means less diversification, it also implies a focus on more stable and established companies, which can offer reduced volatility during market downturns.
Performance
Both funds have shown strong returns, but their performance can vary depending on the timeframe. Historically, VTSAX has slightly outperformed VFIAX over longer periods due to its inclusion of small-cap stocks, which tend to have higher growth potential.
| Time Period | VTSAX Return | VFIAX Return |
| 1-Year | 22.36% | 22.61% |
| 5-Year | 78.90% | 85.48% |
| 10-Year | 203.93% | 220.96% |
| Since Inception | 510.29% | 479.87% |
Top Holdings
Despite their differences in diversification, the top holdings of VTSAX and VFIAX are quite similar, with heavyweights like Apple, Microsoft, and Alphabet featuring prominently in both funds. However, the weighting of these holdings differs, with a higher concentration in these top stocks in VFIAX as of April, 2024.
| Company | Ticker | VTSAX | VFIAX |
| Microsoft Corp. | MSFT | 5.94% | 6.84% |
| Apple Inc. | AAPL | 5.13% | 5.84% |
| NVIDIA Corp. | NVDA | 4.21% | 5.04% |
| Amazon.com Inc. | AMZN | 3.36% | 3.78% |
| Alphabet Inc. Class A | GOOGL | 1.97% | 2.27% |
Expense Ratios & Fees
Both VTSAX and VFIAX are renowned for their low expense ratios, standing at 0.04% as of 2024. This low cost makes them highly attractive to investors looking to minimize fees and maximize returns.
Tax Efficiency
While both VTSAX and VFIAX offer broad market exposure, their tax implications aren’t a primary focus and their dividends are similar—but still something investors should consider when deciding which one to do. Both VTSAX and VFIAX are tax-efficient due to their infrequent trading. However, the specific tax implications depend on each investor’s tax bracket and how they hold the funds (taxable vs. tax-advantaged accounts). Consulting with a tax professional for personalized advice is recommended.
Dividend Yields
VFIAX typically offers a slightly higher 30-day SEC yield compared to VTSAX, reflecting its focus on large-cap, dividend-paying stocks. This slight difference in dividend yields can be an important consideration for income-focused investors.
- VTSAX: 1.34%
- VFIAX: 1.35%
Because both funds distribute their dividend income quarterly, their final yield percentage may fluctuate.
Risk Comparison
While both VTSAX and VFIAX offer broad market exposure, they differ in their risk profile. With its broader base, VTSAX may reduce investors’ overall portfolio risk through greater diversification. VFIAX, however, might be less volatile due to its concentration in large-cap stocks, which are generally more stable and resilient during economic downturns.
Volatility Metrics
Both funds exhibit similar risk profiles, with high correlation to each other. VTSAX’s broader diversification may lead to a slightly higher beta, while VFIAX’s focus on large-cap stocks could result in a lower beta, potentially offering a bit more stability during volatile markets.
Choosing the Right Fund for Your Portfolio
When deciding between VTSAX and VFIAX for a financial portfolio, healthcare professionals should consider how these funds align with their investment goals.
Investment Goals
The choice between VTSAX and VFIAX largely depends on your investment goals. VTSAX offers broad market exposure and potential long-term growth, with its inclusion of small and mid-cap stocks offering additional growth opportunities, albeit with higher risk.
VFIAX might be more suitable for investors who prefer stability and lower volatility. Its focus on large, established companies provides a potentially lower volatility profile that’s ideal for investors nearing retirement or with lower risk tolerance.
Portfolio Composition
Many investors find value in holding both VTSAX and VFIAX to balance their portfolio, benefiting from VTSAX’s broader market coverage and VFIAX’s stability. This combination can offer a well-rounded exposure to the U.S. stock market, optimizing the portfolio for both growth and stability.
The Bottom Line: Which Vanguard Fund Is Better for You?
VTSAX and VFIAX are excellent options for healthcare professionals and doctors looking to gain exposure to the U.S. stock market through low-cost, high-quality index funds. Both funds have proven track records of delivering solid returns, making them valuable components of any strategic investment portfolio. The choice between the two should be guided by your individual investment goals, risk tolerance, and portfolio strategy. Invest wisely, and consider consulting with a financial advisor can also provide personalized insights to ensure your investments align with your long-term objectives.
Additional Investment Fund Resources
Want to learn more about various investment fund options? Look at the other articles in this series for more information:
- VTI vs. VTSAX: Choosing the Best Vanguard Investment
- 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.
