Vanguard VFIAX vs VOO

vanguard vfiax vs voo

The fact is that over time, few professionals can consistently beat index returns, which makes 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.

FocusVFIAX 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.

 


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