VTSAX vs. VFIAX:  Which Index Fund Performs Better?

Index funds make for great core holdings in your stock portfolio. They are typically better investments than individual stocks because, by and large, their diversification exposes average investors to less risk in the long-run. 

There are several factors to consider when picking out an index fund to invest in, such as the level of risk you feel comfortable taking. If you have a high level of risk aversion, you should choose a broad index, such as a total stock market index, instead of a small-cap index. 

How to Choose an Index Fund

The Vanguard Total Stock Market Index Fund (VTSAX) is a large-blend mutual fund that provides investors with exposure to the complete United States equity market. The index fund tracks the CRSP U.S. Total Market Index and is one of the world’s largest in terms of assets under management.

Overview of VTSAX

The Vanguard 500 Index Fund Admiral Shares (VFIAX) includes exposure to 510 of the largest United States companies that account for around 75% of the country’s stock market value.  The index fund tracks the S&P 500 as its benchmark for comparing investment returns. 

Overview of VFIAX

Both VTSAX and VFIAX are large blend funds, meaning they hold a combination of growth and value stocks in their portfolio. Blended funds offer investors a diversification into both popular investment styles (growth vs. value) and do not specialize in either specific investing style.

Similarities Between VTSAX and VFIAX

→ Investment style.

To give an idea of how the two funds compare, VFIAX essentially acts as a subset of VTSAX. To be more exact, all of the 510 stocks VFIAX holds show up in VTSAX.  However, VTSAX also holds a few thousand additional (small-cap) stocks as well. 

→ Market-cap weighted indexes.

To compare these two benchmarks, around 75% of VTSAX’s value reflects stocks in the S&P 500. The top holdings for each are mostly the same, though with less weighting in those top stocks than in VFIAX.

→ Top ten holdings.

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