Deciding to invest in index funds is one of the smartest decisions you can make as an investor. However, while deciding to invest in index funds is easy, choosing which funds to invest in is not always as straightforward. Today, we’ll be comparing three popular funds from Vanguard: VTSAX vs VTI vs VOO.
Those of you that know me know that I’m a Schwab guy myself, but that’s not to say I don’t love Vanguard. When I was first deciding what broker to sign up with a few years ago, I spent countless hours deciding between the two.
And by countless, I mean a few hours doing online research.
I quickly learned that Schwab had lower fees, Vanguard had more tax efficient funds, and both offer a wide variety of benefits to investors.
Essentially, I learned that both are great brokers because of the high-quality and low-cost index funds and ETFs they offer.
Given that Vanguard is a top broker, it’s worthwhile to highlight some of the funds that they offer. Specifically, these three common options: VTSAX vs VTI vs VOO. Before diving right into their funds, we’ll start with a quick history lesson.
Vanguard History
Vanguard was founded in 1975 by one of my favorite people in the investing community, the late John Bogle.
John “Jack” Bogle created a unique company in Vanguard, one where its investors are the owners. With this one-of-a-kind structure, Vanguard is able to reinvest its profits and keep costs low.
Proving that it is truly an investor-focused investment company.
On top of creating a new company structure, Bogle is also credited with creating the first index fund. The fund, Vanguard 500 Index Fund (VFINX), was criticized as “unamerican” at launch.
The common practice at the time included buying individual stocks or hiring a professional to manage your portfolio. Investors were baffled by someone who would concede to matching the market instead of trying to beat it.
Except, Bogle was a visionary. He knew that simple indexing could outperform active management by a fund manager, and $1.6 trillion worth of people would eventually follow him.
Today, Vanguard is run by CEO Mortimer J. Buckley and they manage $1.6 trillion in assets.
Vanguard Milestones
Vanguard has been a pioneer in the investment world over the past 40+ years, below are some impressive milestones that they hit:
- 1975 – Vanguard was founded by John Bogle
- 1976 – Bogle and Vanguard create the first index fund
- 1977 – Vanguard takes another step to keep costs low by eliminating loads, or sales commission
- 1990 – The first international stock index funds are created by Vanguard
- 2001 – Vanguard begins to offer ETFs
- 2013 – Assets under management surpass $2 trillion
- 2018 – Mortimer J. Buckley becomes CEO
Learn more about Vanguard‘s history here.
List of Vanguard Index Funds
Vanguard offers a variety of index mutual funds and ETFs (exchange traded funds). To be exact, they currently offer 62 index funds and 74 ETFs.
Largely, I view index funds and ETFs as the same, but there are a few differences. The main one being that ETFs are traded like stocks throughout the trading day, while index funds are traded only once at the end of the day.
If you’re interested, you can learn more about the differences between index funds and ETFs here.
Regardless, all of Vanguard’s funds fall into one of the six broad categories below:
- U.S. Bond Funds and ETFs
- U.S. Stock Funds and ETFs
- International Bond Funds and ETFs
- International Stock Funds and ETFs
- Sector and Specialty Funds and ETFs
- Balanced Funds (Target-Date Funds)
Three of the most popular funds that Vanguard offers are VTSAX, VTI, and VOO. The first being an index mutual fund, while the second two are ETFs.
All three of them would be classified as U.S. Stock Funds and ETFs.
The data below is as of January 2021.
VTSAX Overview
The Vanguard Total Stock Market Index Fund (VTSAX) is designed to match the entire US stock market, including small-cap, mid-cap, and large-cap equities.
It’s a good option if you’re interested in building a simple, lazy portfolio (like a 3 fund portfolio).
Fund Details:
| Asset Class | Stock / Equity |
| Expense Ratio | 0.04% |
| Min. Investment | $3,000 |
| 5-Yr Return | 13.95% |
| Yield | 1.43% |
| Load Fee | None |
| 12b-1 Fee | None |
| Transaction Fee | None |
| # of Stocks | 3586 |
| Net Assets | $1.0 Trillion |
VTI Overview
The Vanguard Total Stock Market ETF (VTI) is nearly identical to VTSAX, but is an ETF instead of an index mutual fund.
Fund Details:
| Asset Class | Stock / Equity |
| Expense Ratio | 0.03% |
| Min. Investment | None |
| 5-Yr Return | 13.96% |
| Yield | 1.44% |
| Load Fee | None |
| 12b-1 Fee | None |
| Transaction Fee | None |
| # of Stocks | 3586 |
| Net Assets | $1 Trillion |
VOO Overview
The Vanguard S&P 500 ETF (VOO) has a narrower focus compared to the two other options above. It tracks the S&P 500, which is comprised of the 500 largest companies in the United States.
Its index fund counterpart would be the Vanguard 500 Index Fund (VFIAX), the new, Admiral version of the first index fund ever created.
Fund Details:
| Asset Class: | Stock / Equity |
| Expense Ratio: | 0.03% |
| Min. Investment: | None |
| 5-Yr Return: | 14.12% |
| Yield: | 1.55% |
| Load Fee: | None |
| 12b-1 Fee: | None |
| Transaction Fee: | None |
| # of Stocks: | 509 |
| Net Assets: | $620 Billion |
VTSAX vs VTI vs VOO Comparison
As you may have noticed by now, all three of these funds from Vanguard are very similar overall.
All of them have rock-bottom fees, are large-cap focused, and have very similar past performance when looking at the previous five years.
Though, there are some slight differences to be aware of:
Type of Fund
VTSAX and VTI are both total US stock market funds.
VOO is an S&P 500 fund.
A total stock market fund provides slightly more diversification, but also slightly more risk. These total market funds carry mid-cap and small-cap stocks, as well as large, blue-chip American companies. These smaller and mid-sized companies are generally viewed as riskier because they have more opportunity to grow, but also have a higher likelihood of failing.
The S&P 500 fund attempts to match the S&P 500 index set by Standard and Poor’s. It simply carries the biggest 500 companies in the United States.
Despite these slight differences, It’s worth noting that Vanguard rates all three funds at the same risk level and all three have provided very similar returns over the past 5 years.
ETF vs Index Fund
VTSAX is an index mutual fund.
VTI and VOO are both ETFs.
As mentioned, the major difference between an index fund and ETF (exchange traded fund) is:
- An index fund is traded once at the end of the day
- An ETF is traded throughout the day, like a stock
To be frank, this difference should not matter to long term investors. If you’re investing for the long term, there shouldn’t be a sudden urge to sell something at noon.
Another small variable to point out is that ETFs have a spread. Like a stock, there is a bid and ask price, and the difference between those two numbers goes to the middle man (broker). Luckily, most Vanguard ETFs are big enough where the spread is very small and usually not a huge factor.
To sum it up with an analogy, choosing between an index fund and ETF is like choosing between Honda and Toyota. Both are fine options and will get you to where you need to go.
Minimum Initial Investment
VTSAX has a $3,000 minimum investment.
VTI and VOO both don’t have a minimum investment (it is the price of one share).
Over the long term, this difference does not matter at all.
Although, for new investors, $3,000 is a lot of money to scrounge up for an initial investment! When I started investing, all I had was a few hundred bucks.
Other Popular Vanguard Funds
Now, comparing VTSAX vs VTI vs VOO is not a comprehensive view of Vanguard funds – these are only a few of the good funds that Vanguard has to offer.
Vanguard offers hundreds of funds across a variety of asset types. Below are some other common options, spanning outside of just equity funds:
Bond Funds:
- BND – Total Bond Market ETF
- BIV – Intermediate-Term Bond ETF
- VBTLX – Total Bond Market Index Admiral Shares
Equity Funds:
- VFIAX – 500 Index Admiral Shares
International Equity Funds:
- VEA – FTSE Developed Markets ETF
- VTIAX – Total International Stock Index Admiral Shares
- VEMAX – Emerging Markets Stock Index Admiral Shares
If you’re interested in getting into the weeds, you can get a full list of Vanguard funds here.
It’s fun (for investing nerds) to see everything they have to offer, but at the end of the day, keeping it simple is usually the best option…
VTSAX vs VTI vs VOO: Why Simple is Better
Choosing between VTSAX vs VTI vs VOO is hard because they are so similar, but also easy because they are so similar. Stick with me…
You can’t really go wrong with any of them, in my unprofessional opinion.
They all match the two major things I look for choosing an index fund or ETF:
- The fund matches a broad underlying index (nothing actively managed)
- The expense ratios and costs, in general, are extremely low
One of the tried and true investment strategies of Bogleheads (loyal Vanguard and John Bogle followers) is to build a simple, passively managed 3 fund portfolio (or even 1 or 2 fund portfolio).
A 3 fund portfolio would consist of one of the funds above, in combination with an international equity fund and bond fund. The goal of a 3 fund portfolio is to build a diversified portfolio as easily as possible.
A single fund portfolio is even simpler, and you would choose only one of the funds (between VTSAX, VTI, and VOO) and funnel all of your money into that single fund. It’s riskier, but those that choose to use this strategy realize that broad market funds are sometimes diversified enough to fit their needs. Plus, their costs stay very low thanks to an extremely low expense ratio.
Regardless of what simple strategy you choose to implement, before investing, it’s best to be clear on your long-term plans and goals.
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Thanks for the useful info.