VTI (Vanguard Total Stock Market ETF) and VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) are two investment options offered by Vanguard.
In large part, these two investment options are identical, except VTSAX is a mutual fund, and VTI is the alternative exchange-traded fund (ETF).
ETFs and mutual funds are mostly distinguished by their trading mechanisms. ETFs trade on stock exchanges throughout the trading day, much like individual stocks, while mutual funds are priced and traded at the end of the day based on their end-of-day net asset values (NAV).
Along with their different structures (ETF vs. mutual fund format), VTI and VTSAX differ in fees, investment minimums, and tax efficiency.
In this post, we’ll compare VTI and VTSAX, so you can make more informed decisions about which fund best suits your investment goals and preferences.
What is VTSAX?
VTSAX tracks the CRSP US Total Market Index. This index covers almost 100% of the US equity market. By extension, this means that VTSAX holds stocks of all sizes and types (large-cap, mid-cap, and small-cap, growth, value) that trade on the Nasdaq or NYSE.
Here’s a comprehensive article we wrote on VTSAX.
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What is VTI?
The Vanguard Total Stock Market ETF (VTI) is nearly identical to VTSAX except for one key difference – VTI is Vanguard’s ETF offering of the VTSAX mutual fund. This difference in format has some implications, which we will discuss for the remainder of the article.
The VTSAX mutual fund is a benchmark used to track the performance of the entire US stock market. To achieve this, the portfolio invests in a wide range of companies in various sectors, market capitalization, and stock options (growth vs value stocks).
As the ETF alternative to VTSAX, VTI allows investors to gain exposure to a diversified portfolio of U.S. stocks in a single investment vehicle. Again, the main difference between the two is that VTI can be bought and sold throughout the day just like a stock, while VTSAX is traded at the end of the day based on its end-of-day net asset values.
VTSAX vs. VTI: Which Index Fund is Better?
Diversification – Tie
VTI and VTSAX have the same portfolio composition. Meaning they have the same holdings, industries, and composition within your investment.
Below you can see a breakdown of both VTSAX and VTI by sector as of October 8, 2023.
| Sector | VTI | VTSAX |
|---|---|---|
| Technology | 30.20% | 30.20% |
| Consumer Discretionary | 14.40% | 14.40% |
| Industrials | 13.00% | 13.00% |
| Health Care | 12.60% | 12.60% |
| Financials | 10.30% | 10.30% |
| Consumer Staples | 5.10% | 5.10% |
| Energy | 4.60% | 4.60% |
| Real Estate | 2.90% | 2.90% |
| Utilities | 2.70% | 2.70% |
| Telecommunications | 2.20% | 2.20% |
| Basic Materials | 2.00% | 2.00% |
Both VTSAX and VTI invest in large-, mid-, and small-cap stocks, which are diversified across growth and value stocks. Below are the top 10 holdings of VTSAX and VTI as of October 8, 2023.
| Company | VTSAX | VTI |
|---|---|---|
| Apple Inc. | 6.38% | 6.38% |
| Microsoft Corp. | 5.54% | 5.54% |
| Amazon.com Inc. | 2.74% | 2.74% |
| NVIDIA Corp | 2.64% | 2.64% |
| Alphabet Inc. A | 1.84% | 1.84% |
| Tesla Inc C | 1.58% | 1.58% |
| Alphabet Inc Class C | 1.56% | 1.56% |
| Meta Platforms Inc Class A | 1.49% | 1.49% |
| Berkshire Hathaway Inc Class B | 1.46% | 1.46% |
| Eli Lily and Co | 1.08% | 1.08% |
VTSAX, and VTI have the flexibility to invest in small-cap and mid-cap investment opportunities. That said, it also means that if market opportunities present themselves, they may deviate at times from the benchmark of the U.S. stock market (S&P500).
Minimum Investment – VTI Wins
VTI has the edge here with a minimum investment of as low as $1.00, compared to VTSAX’s $3,000 minimum investment.
Because VTI is an ETF that trades daily, it can be traded for as low as $1.00. As a mutual fund, VTSAX is usually accompanied by higher investment minimums.
That said, while investment minimums are higher for VTSAX, Vanguard is an investor-focused provider of low-cost and easy-to-access mutual funds.
Expense Ratios – Slight Edge to VTI
VTI has a slight edge when it comes to its expense ratio, with an expense ratio of 0.03%.
In contrast, VTSAX has an expense ratio of 0.04%.
While the 0.01% difference in expense ratios is small, this figure may become significant if you may particularly large investments and the difference compounds over time.
It’s important to remember that expenses are deducted from dividend or capital gains payments. You are not required to pay the expenses separately and they are not deducted from the principal.
Trading and Liquidity – Split Decision
As an ETF, you can buy and sell VTI throughout the day at any time during market hours. This makes VTI more tradable and liquid compared to VTSAX.
One drawback of trading ETFs is that they typically trade at prices slightly different from their Net Asset Value (NAV). The difference is also known as bid-ask spread). When trading VTI throughout the day, you will likely pay a premium compared to the actual market value.
VTSAX, on the other hand, can only be traded at the end of the day based on NAV. While this makes VTSAX less liquid compared to VTI, it offers the benefit of dollar cost-averaging rules to automate your investing.
Neither VTI nor VTSAX has the advantage here because the advantage depends on your investment style and strategy. If you are an investor and you like to trade daily or change positions frequently, then VTI is the better option. On the other hand, If you are a long-term buy-and-hold investor not concerned with trading execution strategies and small entry and exit “fees” associated with bid-ask spreads, you may prefer VTSAX.
Tax Efficiency – Split Decision
When comparing two different investment options, it’s important to consider the tax implications and not only the returns they generate. The tax implications of an investment can have a meaningful impact and you should focus on which investment creates the highest after-tax return.
Generally, if you hold the assets in tax-deferred or non-taxable accounts (such as IRAs), ETFs will have a slight edge from a tax efficiency perspective. Due to some of the internal workings of ETFs vs. mutual funds, ETFs tend to distribute comparatively fewer capital gains to shareholders – these same gains are simply more challenging to manage efficiently via the mutual fund format.However, Vanguard has notably solved this distinction by creating a patented process to make its mutual funds and ETFs equivalently tax-efficient. In the table below, we can see the after-tax returns for VTI and VTSAX.
What we can see is that the final after-tax returns are nearly identical, in particular as the time increases, the differences in after-tax returns decrease. This shows that Vanguards has successfully been able to minimize and nearly eliminate any tax differences between their ETFs and mutual funds.
Tax Loss Harvesting – Slight Edge to VTSAX
Tax-loss harvesting is a strategy that involves selling investments at a loss to offset gains (and up to $3,000 in ordinary income). This strategy can be implemented for any investment type, including mutual funds and ETFs.
With VTSAX and VTI, VTSAX has a slight edge because of how it is traded. VTSAX and all other mutual funds are only traded after the market closes. As a result, you can sell VTSAX and have the funds scheduled to reinvest the same day. This allows you to harvest tax losses and reinvest in a similar (or different) fund that same day.
With VTI and other ETFs, you must wait for the funds to settle before you can reinvest those funds. With most accounts, you will have to wait two days after the order is executed, commonly referred to as T+2.
Dividend Reinvestment – Tie
Dividend reinvestment empirically accounts for a tremendous amount of long-term performance for buy-and-hold investors. Studies have shown that much of the accumulated gains of investors are a direct result of long-term dividend reinvestment strategies.
When considering a fund, ease of dividend reinvestment should be at the forefront of your mind. Luckily, VTI and VTSAX have seamless automated dividend reinvestment processes at the prevailing market price during the reinvestment date.
Performance & Dividends – Tie
In theory, since VTI and VTSAX are identical in terms of their portfolio, they should generate the same returns.
Below is a comparison of VTI and VTSAX total return by NAV.
| Total Return by NAV | |||
|---|---|---|---|
| Year | VTI | VTSAX | Difference VTI vs VTSAX |
| 2022 | -19.50% | -19.53% | 0.03% |
| 2021 | 25.72% | 25.71% | 0.01% |
| 2020 | 20.95% | 20.99% | -0.04% |
| 2019 | 30.80% | 30.80% | 0.00% |
| 2018 | -5.13% | -5.17% | 0.04% |
| 2017 | 21.16% | 21.17% | -0.01% |
| 2016 | 12.68% | 12.66% | 0.02% |
| 2015 | 0.40% | 0.39% | 0.01% |
| 2014 | 12.56% | 12.56% | 0.00% |
| 2013 | 33.51% | 33.52% | -0.01% |
| 2012 | 16.41% | 16.38% | 0.03% |
| 2011 | 1.06% | 1.08% | -0.02% |
| 2010 | 17.26% | 17.26% | 0.00% |
| 2009 | 28.82% | 28.83% | -0.01% |
| 2008 | -36.97% | -36.99% | 0.02% |
From the chart above, you can see that there is a small variation year over year between VTI and VTSAX.
For example, the largest difference in returns since 2008 was in 2020 when VTI had a total return of 20.95% and VTSAX had a total return of 20.99%. The largest difference between these two only generated a 0.04% difference in total returns.
Because the variation is marginal and has little effect on actual returns, VTI and VTSAX are generally considered to have the same return levels.
Now let’s compare the historical dividend yield for VTI and VTSAX.
| Average Dividend Yield | |||
|---|---|---|---|
| VTI | VTSAX | Difference | |
| 2023 | 1.56% | 1.55% | 0.01% |
| 2022 | 1.48% | 1.47% | 0.01% |
| 2021 | 1.28% | 1.27% | 0.01% |
| 2020 | 1.77% | 1.76% | 0.01% |
| 2019 | 1.84 | 1.83% | 0.01% |
| 2018 | 1.72% | 1.72% | 0.00% |
| 2017 | 1.85% | 1.85% | 0.00% |
| 2016 | 1.93% | 1.92% | 0.01% |
| 2015 | 1.85% | 1.85% | 0.00% |
| 2014 | 1.75% | 1.75% | 0.00% |
| 2013 | 1.86% | 1.86% | 0.00% |
Similar to the total returns performance between VTI and VTSAX, there is a very small variation in the average historical dividend yield between these two investments. The variation is significantly smaller here with a maximum difference of 0.01% in multiple years since 2013.
VTI vs VTSAX: Which One Should I Invest In?
Ultimately, whether you decide to invest in VTI or VTSAX will depend on your investment strategy and the amount you want to invest.
VTI is the ETF alternative of VTSAX, an index fund designed to expose investors to the entire performance of the U.S. stock market. As such, they both offer the same risk and diversification.
One key distinction when deciding on whether you should invest in VTI and VTSAX is your trading preference. If you want more trading flexibility, then you may want to invest in VTI, as it allows you to trade through the day when the market is open. On the other hand, if you prefer to buy and hold instead of actively trade, then investing in VTSAX might be a better option for you.
Another consideration is the amount you are looking to invest. If you don’t have at least $3,000 to invest, then VTI is a better option. Vanguard’s patented structure has nearly eliminated any tax efficiency difference between their ETFs and mutual funds so there is no need to consider tax efficiency when deciding between between VTI and VTSAX.
