Vanguard Total Stock Market Index Fund vs. Vanguard 500 Index Fund: An Overview
Two of Vanguard’s most popular products are—the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and the Vanguard 500 Index Fund Admiral Shares (VFIAX). While both can function as suitable core holdings in a stock portfolio, these similar-sounding mutual funds pursue different investment strategies.
As its name implies, the Total Stock Market Index Fund provides exposure to the entire U.S. equities market, as represented by the Center for Research in Security Prices (CRSP) U.S. Total Market Index of nearly 4,000 stocks.
On the other hand, the 500 Index Fund only provides exposure to 500 of the largest U.S. companies, similar to the S&P 500 Index. In this article, we’ll review some of the similarities and differences between these two popular Vanguard mutual funds.
Note that there are two classes of the Vanguard Total Stock Market Index Fund and Vanguard 500 Index Fund—the Admiral shares and the Investor shares. The Investor shares of both funds—the Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) and Vanguard 500 Index Fund Investor Shares (VFINX) are no longer open for new investment. The only difference between the Admiral and Investor share funds is the minimum required investment.
- Though both are broad-based equity mutual funds, the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and the Vanguard 500 Index Fund Admiral Shares have different investment objectives.
- The Vanguard Total Stock Market Index Fund invests in the entire U.S. equities market, consisting of thousands of publicly traded companies.
- The Vanguard 500 Index Fund invests solely in the 500 largest U.S. firms that comprise the S&P 500 index.
- The Vanguard Total Stock Market Index Fund could represent all of a portfolio’s equity holdings, while the Vanguard 500 Index Fund should ideally be counterbalanced with aggressive growth stocks.
Vanguard Total Stock Market Index Fund (VTSAX)
The Vanguard Total Stock Market Index Fund (VTSAX) is a mutual fund that provides diversified exposure to small-, mid-, and large-cap growth and value stocks traded on the Nasdaq and New York Stock Exchange (NYSE).
The fund employs a representative sampling approach to approximate the entire index and its key characteristics.
As of December 30, 2021 the fund held 4,149 stocks and controlled net assets of $300 billion. Technology, financial, industrial, health care, and consumer service companies make up its largest holdings. VTSAX charges an extremely low expense ratio of 0.04% and requires a minimum investment of $3,000.
Top 10 Holdings
The top 10 holdings of VTSAX are (as of end of year 2021):
|VTSAX Top 10 Holdings|
|Holdings||% Portfolio Weight|
|Alphabet Inc Class A||1.83|
|Alphabet Inc Class C||1.65|
|Meta Platforms Inc Class A||1.65|
|Berkshire Hathaway Inc Class B||1.02|
|JPMorgan Chase & Co||1.01|
Both the Vanguard Total Stock Market Index and the Vanguard 500 Index mutual funds are also available as exchange-traded funds (ETFs).
Vanguard 500 Index Fund (VFIAX)
The first index fund for individual investors, according to the company, the Vanguard 500 Index Fund (VFIAX) provides exposure to a subset of the entire U.S. equity market—specifically, the Standard & Poor’s 500 Index, whose component companies account for about three-fourths of the U.S. stock market’s value.
The Vanguard 500 Index Fund seeks to replicate its benchmark index by investing its total net assets in the stocks comprising the index and holding each component with approximately the same weight as the index. In this way, the fund barely deviates from the S&P 500, which it is designed to mimic.
As of December 30, 2021, the Vanguard 500 Index Fund had $280 billion in total net assets and, despite its name, holds 512 stocks. Like its sister fund, VTSAX charges an expense ratio of 0.04% and requires a minimum investment of $3,000.
Top 10 Holdings
The top 10 holdings of VFIAX are (as of end of year 2021):
|VFIAX Top 10 Holdings|
|Holdings||% Portfolio Weight|
|Alphabet Inc Class A||2.2|
|Alphabet Inc Class C||2.06|
|Meta Platforms Inc Class A||1.99|
|Berkshire Hathaway Inc Class B||1.32|
|JPMorgan Chase & Co||1.22|
Note that the top 10 holdings in both funds are the same (although with different portfolio weights).
In comparison to the Vanguard Total Stock Market Index Fund, the Vanguard 500 Index Fund has historically experienced slightly lower volatility and return. However, the Sharpe ratios (the most widely used method for calculating risk-adjusted return) are nearly identical, which indicates that investors in both funds had similar returns on a risk-adjusted basis.
The Vanguard Total Stock Market Index Fund is best suited for moderately to highly risk-tolerant investors seeking low-cost exposure to the U.S. stock market. Additionally, it could function as a single domestic equity fund in a portfolio.
Meanwhile, the Vanguard 500 Index Fund is suitable as a core equity holding for investors with a long-term investment horizon and a preference for the lower risk of the large-cap equity market. Since it does concentrate on more conservative, large-cap stocks, the fund might work best in a diversified portfolio that contains exposure to other types of equities for growth.
What Is the Fidelity VTSAX Equivalent?
Fidelity offers a mutual fund that is broadly similar to Vanguard’s VTSAX: the Fidelity ZERO Total Market Index Fund (FZROX)
How Can I Invest in the VTSAX?
VTSAX can be purchased directly through Vanguard or via your broker’s mutual fund portal. There is also an ETF equivalent to VTSAX: the Vanguard Total Stock Market ETF (VTI)
What Are VTSAX ETF Equivalents?
In addition to the VTI there are several other broad market ETFs including Schwab’s Broad Market ETF (SCHB) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT).