Discover the Key Differences Between Vanguard Total Stock Market Index Fund and Vanguard 500 Index Fund

Vanguard Total Stock Market Index Fund vs. Vanguard 500 Index Fund: A Detailed Comparison

Vanguard offers two highly regarded mutual funds: the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and the Vanguard 500 Index Fund Admiral Shares (VFIAX). Both funds are excellent choices for building a core stock portfolio, but they follow different investment approaches tailored to different investor preferences.

The Vanguard Total Stock Market Index Fund provides broad exposure by investing across nearly 4,000 U.S. stocks, representing the entire market spectrum from small-cap to large-cap companies. It tracks the CRSP U.S. Total Market Index, capturing a wide variety of sectors and industries.

In contrast, the Vanguard 500 Index Fund focuses exclusively on the 500 largest U.S. companies, mirroring the S&P 500 Index. This fund offers concentrated exposure to major industry leaders across the U.S. economy.

Key Highlights

• Both funds are broad-based stock mutual funds managed by Vanguard.
• VTSAX invests in thousands of U.S. companies of varying sizes and sectors, ensuring extensive diversification.
• VFIAX concentrates on the 500 largest U.S. firms, offering exposure to established blue-chip stocks.

Understanding 'Admiral' Shares

Both VTSAX and VFIAX are available to new investors through Vanguard's Admiral shares, which require a minimum investment of $3,000. Their Investor share classes are closed to new purchases, making Admiral shares the go-to option for new investors.

Vanguard Total Stock Market Index Fund (VTSAX)

VTSAX tracks approximately 4,000 U.S. companies spanning small, mid, and large-cap stocks across all major sectors. This fund uses a representative sampling method to closely replicate the total market index, balancing growth and value stocks listed on the Nasdaq and NYSE.

As of January 2025, VTSAX held 3,609 stocks with net assets totaling $1.8 trillion. Its top holdings, dominated by technology giants like Apple, Microsoft, NVIDIA, and Amazon, reflect the fund’s sector weightings.

With an ultra-low expense ratio of 0.04%, VTSAX offers cost-effective access to the full breadth of the U.S. stock market.

Top 10 Holdings (2024)

Apple Inc., Microsoft Corp., NVIDIA Corp., Amazon.com Inc., and other leading companies constitute the fund’s largest positions.

Vanguard 500 Index Fund (VFIAX)

VFIAX is designed to replicate the S&P 500 Index by investing in the 500 largest U.S. companies, capturing approximately 75% of the total U.S. stock market value. This fund closely matches the index weights, providing investors with stable exposure to America’s biggest corporations.

By January 2025, VFIAX had $1.4 trillion in assets under management, holding exactly 500 stocks. It also maintains a low expense ratio of 0.04% and requires a minimum $3,000 investment.

Top 10 Holdings (2024)

Similar to VTSAX, VFIAX’s top holdings include major technology and industrial companies, reflecting the dominance of large-cap firms in the U.S. economy.

Comparing the Two Funds

While both funds share many top holdings, their portfolios differ significantly beyond the largest companies. VTSAX’s broad diversification includes smaller and mid-sized companies, offering potentially higher growth but with increased volatility. VFIAX’s focus on large-cap stocks tends to provide more stability and lower risk, appealing to conservative investors.

VTSAX is ideal for investors seeking comprehensive exposure to the entire U.S. stock market and who can tolerate moderate to high risk. VFIAX suits those preferring a core investment in established large-cap stocks with a long-term horizon.

Historically, VFIAX has exhibited slightly lower volatility and returns compared to VTSAX. However, both funds offer similar risk-adjusted returns, making them competitive options depending on investor risk tolerance.

Fidelity’s Comparable Fund

For investors interested in an alternative, Fidelity’s ZERO Total Market Index Fund (FZROX) offers a similar broad-market exposure to Vanguard’s VTSAX.

How to Invest in VTSAX

Investors can purchase VTSAX directly through Vanguard or via brokerage platforms offering mutual fund access. Additionally, the Vanguard Total Stock Market ETF (VTI) provides an ETF equivalent accessible through any brokerage account.

ETF Alternatives to VTSAX

Other broad-market ETFs include Schwab’s U.S. Broad Market ETF (SCHB) and iShares Core S&P Total U.S. Stock Market ETF (ITOT), which offer similar diversified exposure.

Final Thoughts

Though Vanguard’s Total Stock Market Index Fund and 500 Index Fund may appear alike at first glance, they serve distinct roles in an investment portfolio. VTSAX offers a comprehensive stake in companies of all sizes and sectors, suitable for investors seeking growth across the entire U.S. market. VFIAX provides focused exposure to America’s largest and most established companies, appealing to those prioritizing stability and long-term growth.

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