Home Money VTSAX vs VTSMX vs VTI? Vanguard’s Total Stock Market Index Funds Explained

VTSAX vs VTSMX vs VTI? Vanguard’s Total Stock Market Index Funds Explained

by Charles

Created in 1992 with the help of John “Jack” Bogle, Vanguards founder. The Vanguard Total Stock Market Index Fund was designed to provide low cost, broad diversification, and the possibility for tax efficiency. It seeks to track the performance of the CRSP US Total Market Index.

Updated 11/26/2019: VTSMX is closed to new investors, VTSAX minimum investment was been lowered to $3000 in 2018. VTI expense ratio changed between 2018 and 2019. 

The fund is broken up into three different classes.

VTSAX

The Admiral shares class index fund. Provides the lowest expense ratio with the highest minimum investment.

  • Expense Ratio: 0.04%
  • Minimum Investment: $3,000

VTSMX (No longer available to new investors)

The investor shares class index fund. It comes in with a higher expense ratio but a lower minimum investment.

  • Expense Ratio: 0.14%
  • Minimum Investment: $3,000 CLOSED

VTI

This fund differs as it is not a index fund and instead an Exchange Traded Fund or ETF for short. This option allows you to purchase an individual share and avoids the minimum investments of the index funds above.

  • Expense Ratio: 0.03%
  • Minimum Investment: Current stock price

VTSAX vs VTSMX vs VTI

 VTSAXVTSMX (Closed)VTI
Expense Ratio0.04%0.14%0.03%
Minimum Investment$3,000$3,000Current Stock Price
Fund TypeMutual FundMutual FundExchange Traded Fund (ETF)

With the minimum investment lowered for VTSAX, it has effectively replaced VTSMX, hence why Vanguard closed VTSMX to new investors. VTI instead of a index fund, it is an ETF. The ETF can incur a trading fee, Vanguard offers a commission free trading system but if you invest with other stock brokers check to make sure you aren’t paying any fees.

Historical Average Annual Returns

A look at the returns over various years and compared to the S&P 500.

 1-yr3-yr5-yr10-yrSince Inception
VTSAX14.82%11.58%13.26%10.33%6.69% (11/13/2000)
VTSMX14.71%11.46%13.14%10.21%9.72% (04/27/1992)
VTI14.85%11.59%13.28%10.34%7.15% (05/24/2001)
S&P 50013.82%12.11%13.07%10.72%6.41% (01/01/1957)

Top Holdings

With a total of 3611 stocks making up Vanguard’s total stock market fund in 2019, a large chunk is comprised of their top holdings. The top 10 holdings account for 19.04% of the total assets in the index fund. These top holdings change, but here are companies that you will most likely see: 

  • Microsoft
  • Apple Inc. 
  • Alphebet Inc.
  • Amazon.com Inc.
  • Facebook Inc. 
  • Berkshire Hathaway Inc.
  • JP Morgan Chase & Co
  • Johnson & Johnson 
  • Procter and Gamble 
  • Visa 

Which Total Stock Market Fund to Choose?

<$3,000 investment
Here is my recommended approach.

VTI – With the same expense ratio as VTSAX, use this ETF all the way until you can reach the minimum investment of $3K for VTSAX.

>$3,000 investment

VTSAX – If you can meet the minimum investment requirement then this is simply the easiest approach to take. You don’t have to worry about buying individual shares of VTI and since VTSAX is a index fund you can buy fractional shares and know all your money is going straight towards collecting you interest.

This is especially true if the fund will be housed in a 401k, IRA or HSA. If you don’t know about investing with your HSA then I recommend reading my other article Investing with an HSA.

There are some caveats to this though. Depending on which type of account you are housing these investments in, there can be certain tax efficiencies using ETF’s. You can read further on how ETF’s can be more tax efficient.

Vanguard Total Stock Market Fund as a Single Fund Portfolio

There is rising popularity in holding 100% VTSAX or VTI for your portfolio. Some may choose to balance the risk out with bonds, but regardless the stock portion still remains as Vanguard’s Total Stock Fund. The logic behind this strategy is the largest US corporations that make up VTSAX have such a large market share and do business internationally that holding this “US” stock actually diversifies you globally.

Jack Bogle himself has said:

I’d rather bet on the U.S. This is a great nation with great places to invest. Great financial institutions, great government institutions, although a little bit faltering.

While foreign stocks may be cheaper, they are riskier, he says. Citing that U.S. companies are actually international companies since so much of their profits come from outside of the United States.

With this sentiment and the extremely low expense ratio, it makes sense to have this as your singular stock holding within your portfolio. Add on to the fact that there is no front-end/back-end sales load or distribution expenses makes this a very cheap fund.

Those who wish to diversify further can choose to pick international holdings, but is it really necessary? Only you can decide for yourself.

If you want to see all your investments in one place, I personally use and love Personal Capital. It’s an account aggregate tool that is completely free that gives an easy way to see your investments growing.

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11 comments

Mac August 16, 2018 - 12:25 am

Hi Charles,
Very good explaining about VTSAX, VTSMX and VTI.
It is interesting to me to read your article written in simple word.
Thanks for your good job…

Reply
Charles August 17, 2018 - 3:54 pm

You bet Mac, thank you for the kind words.

Reply
Daniel Johnson October 11, 2018 - 11:46 am

Great article Charles. Very clear and concise explanations. I appreciate you also providing the comparisons as well as the recommendations. Well done.

Reply
Charles November 28, 2018 - 6:49 am

I’m glad it was helpful to you Daniel.

Reply
Pat November 27, 2018 - 6:08 pm

Great article Charles. Like everyone else said it’s clear, concise, and very informative. Take out the word “irregardless” and it’d be perfect.

Reply
Charles November 28, 2018 - 6:41 am

Thank you Pat. I took your advice and removed “irregardless” as well.

Reply
Liz December 30, 2018 - 1:59 pm

Hi! I’m so excited to see your article on this as I’ve been wondering why folks lean to VTSAX over VTI since they have the same expense ratios and track the same companies. I’m still not seeing the advantage of going to Admiral though (other than the ability to purchase fractional shares). Wondering if there are other notable advantages to the Admiral program worth considering? Would love to hear your thoughts! Thank you for your article!

Reply
Charles January 3, 2019 - 5:48 pm

Hi Liz, glad to hear you found the article helpful! Your hunch is right, the main advantage to the admiral shares is it’s lower maintenance for the investor. If you are willing to take a more active role by buying individual shares and reinvesting dividends then an ETF/VTI is a great way to go.

Reply
Massi April 1, 2019 - 7:09 am

I can buy vti and save money in a settlement fund until I reach $3000 to buy vtsax. Can I have both in the same account?

Reply
Angela @ Tread Lightly Retire Early April 12, 2019 - 11:28 am

Gotta love when your Google search lands on a friend’s blog 🙂

Reply
Jim October 28, 2019 - 2:06 pm

Thanks for the explanation–I had not idea why TDAmeritrade switched my VTSMX to VTSAX without letting me know beforehand, they just did it and didn’t explain why 🙂

Reply

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