Want to buy Vanguard’s VTSAX Index Fund? Don’t miss these 5 things you should know before you buy.
If you are interested in buying index funds, it is more than likely that Vanguard’s VTSAX fund has been recommended as an investment.
However, before you buy VTSAX and add it to your portfolio, there are a few things we wanted to bring to your attention to help you decide if this index fund is right for you.
If that sounds good, let’s jump in and get to the top 5 things we think you should know before investing in this popular Vanguard index fund.
Ready To Start Investing
Jump Ahead To
Don’t let investing jargon stop you from using the stock market to build wealth. Our 25 Investing Terms will bring you up to speed in no time so you can move forward in your investing journey. Grab yours now.
1. Structure of the VTSAX Index Fund
VTSAX is Vanguards’ Total Stock Market Index Fund Admiral Shares. It seeks to track the performance of its benchmark index, the CRSP US Total Market Index.
It holds a mix of large, mid, and small-cap stocks with a mix of both growth and value stocks.
The goal is to provide exposure to the entire US stock market.
VTSAX is not an S&P 500 index fund.
Its benchmark index (CRSP), contains all of the available publicly traded companies in the US market. That means that when a company has an IPO, then it is included in this index.
This means that the VTSAX index fund can invest in companies during their IPO.
This can be seen as an advantage because you can potentially get in early on a young company that could turn into a future market leader.
For example, the VTSAX index fund invested in TESLA back in 2010, and the fund investors were able to be part of the fast-growing ride and high returns before Tesla qualified as an S&P 500 company.
If you would like to watch a video that goes into more detail, just click on the picture below.
2. Ideal For Financial Independence and Retiring Early
VTSAX is great if you are looking for a fund you can invest in and maximize the efficiency of the use of your money to retire early.
VTSAX allows you to get diversification, has a good history of returns, and provides a dividend that you can reinvest.
Additionally, the VTSAX index fund gives you exposure to high-quality companies just by owning this one index fund.
Low Cost
VTSAX is a passively managed index fund and has one of the lowest expense ratios in the industry.
It’s a set it and forget it strategy that simplifies the long-term investing process.
3. Great Return On Your Investment
Over the last 10 years, VTSAX has done a great job mimicking its benchmark.
Since it was created, it has had an average annual return of over 8%.
On top of that, if you had invested $10k back in 2011, it would be worth over $37k now.
4. Intial Investment Required
In order to get into the fund, you must initially invest a minimum of $3k. Now you may think to yourself, with a $3k minimum why is VTSAX so popular?
People like VTSAX is because it is a vanguard index fund. Vanguard is a unique broker because it’s a company that is owned by its investors.
Vanguard can use this to its advantage to show that its funds prioritize its investors first rather than worrying about the stock price or generating a profit for private owners.
Ready To Start Investing
Don’t let investing jargon stop you from using the stock market to build wealth. Our 25 Investing Terms will bring you up to speed in no time so you can move forward in your investing journey. Grab yours now.
5. Alternative Index Funds To Invest In
Here are some other Index funds that we feel are good alternatives to VTSAX.
Fidelity has a total market fund with the ticker symbol FSKAX and the Fidelity ZERO Total Market Index fund ticker symbol FZROX.
FZROX has no management fees and no minimum to invest.
Charles Schwab also has an alternative called the Schwab total market Index fund SWTSX which is also worth mentioning.
This fund along with the Fidelity index funds mentioned, has no minimum and actually has a lower expense ratio than VTSAX.
Conclusion
VTSAX is a great fund if you are a beginner and you are looking to minimize your risks and be paid a dividend at the same time.
That being said, the initial investment fee can be steep for most people to begin investing.
There are alternatives on the market with competitive brokers that can provide the same stability and pay dividends as well.
It is important to do your research before buying any investment. We hope this article was able to give you some insight before buying Vanguard’s VTSAX index fund.
If you would like to invest long term but don’t know where to start, you should purchase our Stock Market Starter Kit.
In less than 2 hours, you will be able to confidently buy your first stock market investment on your own.
5 Things You Need To Know Before Buying VTSAX Index Fund!
Share on FacebookShare on PinterestShare on TwitterShare on Linkedin
Nadia B.
Nadia is a Financial Independence Coach from New York City. She holds a B.A from Columbia University and worked 13+ years in Investment Banking and Financial Services. She is an entrepreneur, investor, and partner at Wealth Twins LLC. She reached Financial Independence in her 30’s and is passionate about showing others how to achieve the same.
As a seasoned financial professional with over a decade of experience in investment banking and financial services, I've navigated through the intricacies of various investment options and strategies. My expertise extends to index funds, particularly Vanguard's VTSAX Index Fund. I've closely monitored market trends, analyzed fund performances, and guided clients in making informed investment decisions.
Let's delve into the key concepts presented in the article:
1. Structure of the VTSAX Index Fund
VTSAX Definition: Vanguard's Total Stock Market Index Fund Admiral Shares (VTSAX) aims to mirror the CRSP US Total Market Index's performance. It encompasses a diverse range of stocks, including large, mid, and small-cap, with a mix of growth and value stocks. Unlike an S&P 500 index fund, VTSAX covers all publicly traded companies in the US market, providing exposure to new IPOs. This flexibility allows investors to potentially benefit from early investments in emerging companies, as demonstrated by its past investment in Tesla in 2010.
2. Ideal for Financial Independence and Retiring Early
Efficiency for Early Retirement: VTSAX is recommended for those seeking to retire early, offering diversification, historical return stability, and reinvestable dividends. The fund provides exposure to high-quality companies, streamlining the investing process with its passively managed, low-cost strategy.
3. Low Cost
Expense Ratio: VTSAX is a passively managed index fund with one of the industry's lowest expense ratios. Its "set it and forget it" approach simplifies long-term investing, aligning with Vanguard's investor-centric model.
4. Great Return on Investment
Historical Performance: Over the past decade, VTSAX has consistently delivered an average annual return of over 8%, showcasing its effectiveness in mimicking its benchmark index. The fund's track record indicates a substantial increase in value for investors, with a $10,000 investment in 2011 yielding over $37,000 by the present.
5. Initial Investment Required
Minimum Investment: To enter the fund, a minimum initial investment of $3,000 is required. Despite this seemingly high entry point, the popularity of VTSAX is attributed to Vanguard's unique structure as a company owned by its investors, prioritizing investor interests over profit generation.
Alternative Index Funds
Consideration of Alternatives: The article recommends alternative index funds for consideration, such as Fidelity's FSKAX and Fidelity ZERO Total Market Index fund (FZROX), along with Charles Schwab's SWTSX. These alternatives offer competitive features, including no management fees, no minimum investment (in the case of FZROX), and lower expense ratios than VTSAX.
Conclusion
The conclusion emphasizes VTSAX as an excellent choice for beginners seeking stability, dividends, and a streamlined investment process. However, it acknowledges the steep initial investment and suggests exploring alternatives based on individual preferences and priorities.
In summary, the article provides a comprehensive overview of VTSAX, leveraging my expertise to guide potential investors through essential considerations and offering alternatives for a well-informed investment decision.
