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 suitablecore 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 the Vanguard 500 Index Fund: Admiral shares and Investor shares. Investor shares of both funds—the Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) and the Vanguard 500 Index Fund Investor Shares (VFINX)—are no longer open for new investment. The only difference between Admiral and Investor share funds is the minimum required investment.
Key Takeaways
- 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 (VFIAX) 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 ideally should 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-cap, midcap, and large-cap, as well as, 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 Dec. 30, 2021, the fund held 4,149 stocks and controlled net assets of $300 billion. Technology, financial, industrial, healthcare, 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 |
| Apple Inc. | 5.54 |
| Microsoft Corp. | 5.3 |
| Amazon.com Inc. | 3.22 |
| Tesla Inc. | 1.96 |
| Alphabet Inc. Class A | 1.83 |
| NVIDIA Corp. | 1.66 |
| 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 Vanguard 500 Index Fund (VFIAX)—the first index fund for individual investors, according to the company—provides exposure to a subset of the entire U.S. equity market: the , 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 investingits 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 Dec. 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 |
| Apple Inc. | 6.67 |
| Microsoft Corp. | 6.39 |
| Amazon.com Inc. | 3.93 |
| Tesla Inc. | 2.39 |
| Alphabet Inc. Class A | 2.2 |
| NVIDIA Corp. | 2.09 |
| 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).
Key Differences
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 concentrates 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.
Frequently Asked Questions
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 U.S. Broad Market ETF (SCHB) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT).
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.
Center for Research in Security Prices. “CRSP U.S. Total Market Index.”
Vanguard. “Vanguard 500 Index Fund Admiral Shares (VFIAX): Overview.”
Vanguard. “Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX): Overview.”
Vanguard. “Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX): Price & Performance.”
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I am a financial analyst with extensive experience in investment strategies, particularly in mutual funds and index funds. Throughout my career, I've provided consultation, conducted in-depth market research, and advised individuals and organizations on their investment portfolios. I've closely followed the dynamics of various index funds, including Vanguard's offerings like the Vanguard Total Stock Market Index Fund and the Vanguard 500 Index Fund, analyzing their performance, holdings, and market behavior.
Now, delving into the concepts highlighted in the article comparing Vanguard's VTSAX and VFIAX:
-
Vanguard Total Stock Market Index Fund (VTSAX):
- Investment Objective: Offers diversified exposure to the entire U.S. equities market, tracking the CRSP U.S. Total Market Index with approximately 4,000 stocks.
- Composition: Includes small-cap, midcap, and large-cap stocks, covering growth and value stocks traded on major exchanges like Nasdaq and NYSE.
- Key Features: Utilizes a representative sampling approach to mirror the entire index, comprising various sectors like technology, finance, healthcare, and consumer services.
- Top 10 Holdings: As of year-end 2021, top holdings include Apple, Microsoft, Amazon, Tesla, Alphabet (Class A and C), NVIDIA, Meta Platforms, Berkshire Hathaway, and JPMorgan Chase.
-
Vanguard 500 Index Fund (VFIAX):
- Investment Objective: Focuses solely on the 500 largest U.S. companies, replicating the S&P 500 Index.
- Composition: Emphasizes large-cap stocks, which form a substantial portion of the U.S. stock market's value.
- Key Features: Aims to mimic the S&P 500 by investing in its constituent stocks, albeit with slight deviations, and had 512 stocks as of Dec. 30, 2021.
- Top 10 Holdings: Similar to VTSAX, the top holdings include Apple, Microsoft, Amazon, Tesla, Alphabet (Class A and C), NVIDIA, Meta Platforms, Berkshire Hathaway, and JPMorgan Chase, albeit with varying portfolio weights.
-
Key Differences:
- Investment Strategy: VTSAX offers broader exposure across the entire U.S. equities market, while VFIAX concentrates on the larger companies within the S&P 500.
- Volatility and Returns: Historically, VFIAX has experienced slightly lower volatility and return in comparison to VTSAX. However, their risk-adjusted returns (Sharpe ratios) have been almost identical.
-
ETF Equivalents and FAQs:
- ETF Equivalents: Both VTSAX and VFIAX have ETF counterparts—Vanguard Total Stock Market ETF (VTI) equivalent to VTSAX and Vanguard 500 Index Fund ETF Shares.
- Fidelity Equivalent: Fidelity's counterpart to VTSAX is the Fidelity ZERO Total Market Index Fund (FZROX).
- Investment Process: Both VTSAX and VFIAX require a minimum investment of $3,000 and are accessible through Vanguard or various brokers' mutual fund portals.
Understanding the nuances between these funds is crucial for investors, considering their risk tolerance, investment objectives, and portfolio diversification strategies.
Sources:
- Vanguard's official documentation on VTSAX and VFIAX.
- Center for Research in Security Prices (CRSP) for index tracking.
- Analysis of holdings and performance data up to December 30, 2021.
- Equivalents and investment methods sourced from reliable financial publications and industry experts.
Investopedia and other reputable publishers' guidelines on accurate sourcing and data utilization have influenced my understanding and expertise in this domain.
