We’ve seen that the biggest difference between VTSAX and VFIAX lies in their composition. Archived. This isn’t stock picking. Well, the weighted expense ratio of the KI$$ Portfolio is an insane 0.06% as compared to 0.04% for VTSAX. 16. Part 8 – What happens when we add a Total International Stock Index fund and an Emerging Markets fund? VFIAX is the Vanguard 500 Index Fund Admiral Shares while VTSAX is the Vanguard Total Stock Market Index Fund Admiral Shares. Because I just started this series. This approach, like EVERY approach, will go through periods of underperformance. But they also aren’t the panacea many investors believe them to be. For more reading on equal-cap weighted index funds click HERE. Instead of thinking of holding VTSAX as if you own 3,551 stocks you should view it as if you hold 1 market. Collins also makes an absolutely compelling case for index investing as the optimal way to build wealth. As total stock market index funds, both options allow investors to invest in … Podcasts & Blog Posts. As of this writing, VTSAX is down 28%. Part 11 – Comparing the Ultimate KI$$ Portfolio vs. VTSAX to find the winner and see the power of diversification in action! Greater volatility = greater downside in bear markets. VFIAX: Vanguard 500 Idx;Adm-1.17% 8.22% 14.88% 17.19% 13.34% 14.76% 13.66% DODFX: Dodge & Cox Intl Stock-1.09% 15.85% 0.28% 2.09% 1.16% 6.65% 4.50% LGILX: Laudus US Lg Cap Gr … If you're already a Vanguard client: Call 800-888-3751. Not at all! All of them have rock-bottom fees, are large-cap focused, and have very similar past performance when looking at the previous five years.. As you may have noticed by now, all three of these funds from Vanguard are very similar overall. There is an opportunity cost when you cross the line from simplicity to simplistic. However, I am far from perfect and I recommend that you confirm that what you read on this site is accurate and valid prior to acting on it. And in my opinion, it’s closer to the end of the spectrum by simplicity. As the name suggests, the S&P 500 is composed of the largest 500 publicly traded companies in the U.S. New comments cannot be posted and votes cannot be cast. VTSAX was created in 1992, it currently has an expense ratio of 0.04% and offers exposure to over 3600 stocks. VTSAX is one of the largest index funds in the world. My favorite Vanguard product is its low-fee index funds. Walker Richardson. VFINX vs VFIAX: VFINX is Vanguard’s S&P 500 Index Fund for Investor Class Shares. See Beating VTSAX, Part 2A – Dividing the Total Stock Market into Thirds for more info on the size effect and the effect of breaking down the stock market by market-cap weight. I understood standard deviations, asset class diversification, market-cap diversification, the difference between growth and value stocks, etc. Boom, done! The main premise of the book is that no matter how skilled you are, it’s dang tough to outperform a total U.S. stock market index fund! Equal-cap-weighted funds have outperformed MCW funds more often than not. Part 1 – What’s wrong with VTSAX? The main difference I’ve realized between my perspective and that of many of the book’s fans is that when I read this book it was about the 25th investing book I had read, not the first. If you’re looking for a low fee index fund that tracks the S&P 500, then VFIAX is a great choice and will accomplish that goal. The fund was created in 1992, it currently has an expense ratio … Why? Or put another way, VTSAX is a collection of many stocks (more on that later) that track the American stock market as a whole. How do I know that? eval(ez_write_tag([[728,90],'firethefamily_com-box-3','ezslot_2',116,'0','0'])); Today, we’re exploring the difference between the Vanguard 500 Index Fund Admiral Shares (VFIAX) and the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). VFIAX is largely made up of Microsoft, Apple, Amazon, Alphabet, and Facebook, but also provides exposure to over 500 stocks. Part 6A – Backtesting the Last 2 Decades as if you had really invested $500 every month the entire time! In 2016 JL Collins published his now-famous book, The Simple Path to Wealth: Your road map to financial independence and a rich, free life. You simply get the market’s return. What if I say that you can easily diversify your domestic stock allocation better than simply holding VTSAX? When certain sectors of the stock market are overpriced you pay for it because they must be held at their *current* market-cap weighting. The value factor: Market-cap-weighted index funds also negate the value factor. But buying VSIAX (a small-cap value index fund) while down 38% is a better buy, especially with its higher expected future return! You must understand that the awesome returns large-cap growth stocks had this past decade were an anomaly, not the norm! Or put another way, VTSAX is a collection of many stocks (more on that later) that track the American stock market as a whole. Admiral Funds Have A Minimum Investment. I wasn’t really learning how to invest when I read The Simple Path to Wealth, I was really gaining some great perspectives and insights from a wise man! As far as asset classes and equities are concerned both VTI and VTSAX allow investors to put their money into the same stocks. OR if you prefer to cut to the chase, these two posts present what I landed on as the Ultimate KI$$ Portfolio: Part 10 – The Ultimate KI$$ Portfolio vs. VTSAX – why it works! Finally, probably my favorite insight from the book is how Collins described indexes as self-cleansing. The size factor: We have long-term data (1900-2018) that micro-cap (the smallest of small) stocks have the greatest long-term performance followed by small-cap, mid-cap, and finally, large-cap stocks. The U.S equity market includes small, mid, and large-cap growth and value stocks. This fund has more diversification than VFIAX because it invests in a larger array of the US stock market. … Part 7 – Comparing Inflation-Adjusted returns of VTSAX vs. the diversified portfolio. Though, there are some slight differences to be aware of: If you’re new(ish) to investing, continue learning. VFIAX’s Admiral Shares require more capital but have lower fees. In reality, the optimal place to be is somewhere in the middle. Kerry Cliffs in Ireland are a hidden gem. If you desire some bonds, add in Vanguard’s Total Bond Market Index Fund Admiral Shares (VBTLX). The downside of MCW index funds is that when they’re overpriced because of the large-cap stocks that dominate them you’re stuck paying that premium price. Small-cap stocks have been cheap for a long time but there’s no way to exploit their cheap valuations when you’re getting them through VTSAX. What? That’s great. PS – If you prefer to follow KI$$ on Facebook or Twitter please click here! You aren’t protected (diversified) from the whims of the stock market. Maximal diversification! Both VTSAX and VFIAX are characterized by Vanguard as admiral funds. Because it’s 100% stocks. And how many bonds does it take to match VTSAX’s return? Sure, you “own the entire market” including the small stocks, but do you? Ensure that you understand what you are doing as that greatly decreases your risk of losing money on a poor investment decision. There are a few points that investors should clarify when considering and comparing any product. VFIAX basically = VTSAX, though I do think if you were to hold just one of these funds it should be VTSAX! constructed to have LESS RISK than VTSAX? Personally, I am going to invest in the VFIAX because this mutual fund mimics the S&P 500 index and Vanguard purchases preferred shares of America’s largest and most successful blue chip companies. 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. Vanguard offers some of the best investment options for retirement planning. How Do Life Insurance Companies Make Money? Now admittedly, my recommended portfolio is not included here for comparison. The higher return of small stocks minus big stocks is known as the size premium. Throughout the book, Collins builds a strong case for holding a 100% stock portfolio consisting of only VTSAX. VTSAX vs. VTI: They’re Identical Investments Otherwise. Well, it’s probably time to build the gallows, sharpen your pitchforks, ready the rack, and don some medieval trousers because it’s about to go down! If you found this article helpful, please consider sharing it with a family member or friend. So, my quick conclusion on The Simple Path to Wealth is to read it but to recognize that with some basic tweaks you can quickly be investing in a more diversified portfolio with more upside than simply holding VTSAX. When you hold all stocks by their MCW there’s no way to exploit this. VWUSX has a higher 5-year return than VTSAX (21.79% vs 14.58%). VFIAX tracks the overall performance of the S&P 500 index. Both VTSAX and VFIAX are mutual funds. The primary difference is in the total amount of stocks you’ll be invested in and a small difference in dividend yield. The primary difference between VFIAX and Vanguard Total Stock Market Index Fund is what the index fund is composed of. Know today that, yes, holding VTSAX will help you do better than 90% of actively managed mutual funds. Low cost! Because the 3 funds track different indexes the total # of stocks doesn’t add up to VTSAX’s 3,551. See how they raised the return by ~2% over VTSAX. To see how large-cap dominated VTSAX is, compare its returns with VFIAX (S&P 500 Index Fund). Part 3 – Optimizing the Small-Cap Funds by adding a small-cap value fund and a tax-managed small-cap fund. Diversifying your portfolio by market-cap segment (small-, mid-, large-cap) and styles (value) with individual index funds provides an awesome opportunity to exploit the higher returns from those stocks in the stock market that have been found to provide higher historical and research-based returns than the broad stock market. That’s a seemingly trivial nuance until you continue reading. That drove me to research that more and I learned a ton about stock market history, especially about the S&P 500 Index! 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