It’s important to weigh returns, costs, and composition of each fund. After all, picking the right vehicle is what leads to underperformance or outperformance of the market, and few professionals can consistently beat index returns; it’s why index investing a compelling strategy. Plus, it’s simple, convenient, and worry-free.

Vanguard is a leader in low-cost equity funds, but that doesn’t mean all products are created equal.

With so many options, it can be a challenge to determine which fund best fits the goals of your portfolio and your preferred investment strategy. This is the breakdown you need to get a clear picture of two top contenders: the Vanguard 500 Index Fund Admiral Shares (VFIAX) and the Vanguard S&P 500 ETF (VOO).

VFIAX vs. VOO: The Basics

First things first. There are a few points that investors should clarify when considering and comparing any product.

Focus – VFIAX was a pioneer when it was launched on November 13, 2000. It was the first index fund in the industry that offered individuals an affordable opportunity to gain diversified exposure to the S&P 500 market.

From an industry perspective, VFIAX is quite diverse, as it covers a collection of businesses that represent approximately 75% of the value of the US stock market.

VOO launched on September 7, 2010, with a very similar focus – to offer individual investors affordable access to the S&P 500. However, there is an important difference between the two.

VFIAX is a mutual fund, while VOO is an exchange-traded fund (ETF). That means there are variations in how shares are traded and evaluated.

Mutual fund trades are executed after the market closes each day, while ETF trading goes on throughout the trading day.

Mutual fund share prices are determined by the net asset value (NAV) of all holdings in the fund, while ETF share prices are determined based on the volume of trades.

The cost of purchasing shares differs, which affects your overall expense. If you use an investment broker other than Vanguard, you will pay a fee each time you buy or sell ETF shares.

However, with mutual funds, you typically only pay a fee once – the first time you buy shares and when you sell. You generally do not pay fees when you add additional shares.

Expenses – When it comes to the expense ratio, there is an important distinction between VFIAX and VOO. While VFIAX comes in at 0.04%, VOO is just 0.03%.

Minimum Investment – VFIAX requires a minimum investment of $3,000, but there is no minimum for VOO. This can be critical for small investors who want to get into the market.

Net Holdings – Both funds have similar net holdings, with VFIAX at 459.65B and VOO at 459.65B (*at time of research).

Yield – These are quite similar, with VFIAX coming in at 1.96% and VOO at 1.97%.

Risk – Because both funds track the same index, both are exposed to similar levels of risk. Specifically, investors take on risk of volatility in the stock market.

Historically, the market has always recovered from drops, but there are ups and downs along the way.

Investors with a need to sell shares during a low point are at risk of losing principal.

>> Compare VFIAX vs VTSAX

VFIAX vs. VOO: Holdings

Both options are suitable for investors who prefer a focus on organizations with proven track records, because both funds limit their holdings to S&P 500 companies.

VFIAX and VOO are carefully designed to track the performance of the S&P 500 by investing in the same set large-cap stocks weighted in roughly the same proportion as the S&P.

Note the similarity in each fund’s top list of top 10 holdings:

VFIAX Top 10 Holdings

• Microsoft Corp 3.81 percent
• Apple 3.59 percent
• Amazon.com 3.10 percent
• Facebook (A) 1.68 percent
• Berkshire Hathaway (B) 1.59 percent
• Johnson & Johnson 1.57 percent
• Alphabet Inc Class (C) 1.52 percent
• Alphabet Inc (A) 1.49 percent
• Exxon Mobil 1.44 percent
• JPMorgan Chase 1.40 percent

These companies make up 21.19% of VFIAX’s total assets.

VOO Top 10 Holdings

• Microsoft Corp 3.81 percent
• Apple 3.59 percent
• Amazon.com 3.10 percent
• Facebook (A) 1.68 percent
• Berkshire Hathaway (B) 1.59 percent
• Johnson & Johnson 1.57 percent
• Alphabet Inc Class (C) 1.52 percent
• Alphabet Inc (A) 1.49 percent
• Exxon Mobil 1.44 percent
• JPMorgan Chase 1.40 percent

These companies make up 21.19% of VOO’s total assets – an exact match to VFIAX.

VFIAX vs. VOO: Returns

In the past five years, VFIAX and VOO have outperformed other funds in the same category.

• YTD – VFIAX 13.65% vs. VOO 13.57% vs. Category 12.94%
• 1-Month – VFIAX 1.95% vs. VOO 1.92% vs. Category 1.29%
• 3-Month – VFIAX 13.65% vs. VOO 13.57% vs. Category 12.94%
• 1-Year – VFIAX 9.46% vs. VOO 9.40% vs. Category 6.90%
• 3-Year – VFIAX 13.47% vs. VOO 13.46% vs. Category 11.84%
• 5-Year – VFIAX 10.87% vs. VOO 10.86% vs. Category 8.91%

Year-to-Date, VFIAX’s rank in category by total returns is 33.

Overall, VFIAX is a good choice for investors who prefer the structure and evaluation of mutual funds. Investors relying on a broker outside of Vanguard will save on trading fees as they add shares.

VOO makes sense for investors more comfortable with exchange-traded funds – particularly those who trade through Vanguard directly.

The article Vanguard VFIAX vs VOO was originally posted on Investormint

In the battle between low-cost Vanguard equity funds, VFIAX vs VTSAX, which is better?

VFIAX is the Vanguard 500 Index Fund Admiral Shares while VTSAX is the Vanguard Total Stock Market Index Fund Admiral Shares.

For investors looking for a more diversified portfolio, VTSAX is the better choice because it holds a much larger portfolio of securities compared to VFIAX which is limited to holding S&P 500 companies only.

Both Vanguard funds charge the same expense ratio of 0.04% and both are categorized as Large Blend, so you can’t distinguish between them on cost and focus. But what about performance, yield, risk, and returns since inception?

VFIAX: Vanguard 500 Index Fund
Admiral Shares

The Vanguard 500 Index Fund Admiral Shares [VFIAX] was the industry’s first index fund for individual investors designed to provide diversified exposure to the S&P 500 market at low-cost.

Because the fund holds shares in the 500 largest companies in the United States, it offers exposure across industries and the companies held represent about 75% of the U.S. stock market’s value.

The primary risk when holding VFIAX is from volatility that stems from exposure to the stock market.

The companies have large capitalizations and so VFIAX is commonly a core equity holding in a portfolio.

VTSAX: Vanguard Total
Stock Market Index Fund Admiral Shares

The Vanguard Total Stock Market Index Fund [VTSAX] was created in 1992 with a view to providing investors exposure to the entire U.S. equity market, including:

• Small-cap stocks
• Mid-cap stocks
• Large-cap stocks
• Value stocks

The fund is famous for having low costs, broad diversification, and offering the potential for tax efficiency.

Like VFIAX, VTSAX is commonly held as a core U.S. equity holding but also exposes investors to risk of volatility from stock market swings.

VTSAX or VFIAX:
Portfolio Management

A primary difference between the Vanguard Total Stock Market Index Fund [VTSAX] and the Vanguard 500 Index Fund Admiral Shares [VFIAX] is the number of stocks held by each.

The Vanguard Total Stock Market Index Fund [VTSAX] holds over 3,000 stocks (3,624 as of Dec 2017) while the Vanguard 500 Index Fund Admiral Shares [VFIAX] holds approximately 500 stocks (508 as of Dec 2017).

For investors seeking broader diversification, VTSAX is the better bet.

The equity characteristics of VTSAX and VFIAX are as follows:

*Source: Vanguard as of 11/30/2017

While both VTSAX and VFIAX have similar price/earnings ratios, earnings growth rates, turnover rates, and foreign holdings amounts, a primary difference is that the median market capitalization of the Vanguard 500 Fund is significantly higher.

If you like the idea of sticking with the biggest companies in the U.S. then VFIAX is the better choice but if you want exposure to small-cap or mid-cap stocks that have the potential to become goliaths one day, but commensurately may have more risk, VTSAX is the better selection.

The equity diversification of the Vanguard Total Stock Market Index Admiral Fund is identical to the overall stock market as shown below:

VTSAX vs VFIAX:
Top 10 Largest Holdings

The top 10 largest holdings for both VTSAX and VFIAX are listed below:

1. Apple Inc.
2. Microsoft Corp.
3. Alphabet Inc.
4. Amazon.com Inc.
5. Facebook Inc.
6. Berkshire Hathaway Inc.
7. Johnson & Johnson
8. JP Morgan Chase & Co.
9. Exxon Mobil Corp.
10. Bank of America Corp.

*as of 11/30/2017

VTSAX Fees vs VFIAX Fees

No purchase fees, redemption fees, nor 12b-1 fees apply to either VTSAX or VFIAX fund purchases and holdings.

However, you will be charged a $20 annual account service fee for each Vanguard Brokerage Account, and each individual Vanguard mutual fund holding with a balance of less than $10,000 in the account.

This fee applies to non-retirement accounts, traditional IRAs, Roth IRAs, SEP IRAs, Education Savings Accounts (ESAs), and UGMA/UTMA accounts unless you signed up for account access at vanguard.com and chose electronic delivery of statements, confirmations, as well as Vanguard prospectuses and fund reports.

VTSAX vs VFIAX:
Which Vanguard Fund Is Best?

Both VTSAX and VFIAX have low expense ratios but which is a better bet for your portfolio?

*according to Vanguard

Compared to other similar funds, the expense ratios for both VFIAX and VTSAX are significantly lower. In fact, the average expense ratio of similar funds is 0.99%.

That means on average over a ten year period, you would pay $2,242 for each $10,000 invested at a similar rival fund compared with $95 for each of the Vanguard funds, representing a total savings of $2,147.

VFIAX vs VTSAX: Summary

Both the Vanguard Total Stock Market Index Fund [VTSAX] and the Vanguard 500 Index Fund Admiral Shares [VFIAX] have low expense ratios of 0.04%, quarterly dividend distributions, and hold identical stocks in their top 10 holdings.

For risk-averse investors, the Vanguard Total Stock Market Index Fund is more diversified because it holds over 3,000 stocks compared to around 500 in the Vanguard 500 Index Fund Admiral Shares.

The returns since inception have been similar for both funds, though the Vanguard Total Stock Market Index Fund has a slightly better performance, averaging annualized gains of 6.69% compared to 6.12% for the Vanguard 500 Index Fund Admiral Shares (as of Q4 2017).

For investors looking for dividend income, VFIAX is the better choice because it has a slightly higher SEC yield of 1.86% compared to 1.75% for VTSAX.

Overall, both funds provide excellent exposure to U.S. equity markets as a low-cost core holding but keep in mind that stock market volatility will affect both positions so you may want to consider these equity funds in addition to the 7 best Vanguard funds.

Have you traded VFIAX or VTSAX? What are the best Vanguard funds that you have invested in? Share your thoughts in the comments below, we would love to hear from you.

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The article Vanguard VFIAX vs VTSAX was originally posted on Investormint