VFIAX vs. VFINX: The Best Vanguard S&P 500 Fund
VFINX is a discontinued Vanguard fund, which was replaced by VFIAX. This article will use historical data to give you an overview of these two funds.
Both funds track the S&P 500 index, one of the widely recognized equity benchmarks. Their price movements reflect the overall U.S. equity market, making these funds perfect core holdings in your diversified investment portfolio.
An Overview of VFIAX vs. VFINX
In identifying the differences between these two funds, we need to acknowledge their shared goal. VFIAX and VFINX aim to replicate the performance of the S&P 500 Index with minimal tracking error.
Their holdings consist of some of the biggest U.S. companies, such as Apple, Microsoft, Amazon, and Alphabet, providing extensive exposure to diverse sectors of the U.S. economy, from technology and healthcare to finance and consumer discretionary.
Expense Ratio Comparison between VFIAX and VFINX
An expense ratio is the annual fee that all funds charge their shareholders. It’s calculated by dividing a fund’s operating expenses by the average dollar value of its assets under management (AUM).
VFIAX, the Admiral Shares fund, boasts a lower expense ratio of just 0.04%, providing a cost-effective investment option for those who can meet its higher initial investment requirement of $3,000.
VFINX, the Investor Shares fund, has a higher expense ratio of 0.14%. Although Vanguard has now closed the VFINX for new investors, the existing shareholders can enjoy the benefits of this passively managed index fund.
Dividend Yield Analysis: VFIAX vs. VFINX
Dividend yield represents the annual income investors receive from their investment, measured as a percentage of the fund’s stock price. VFINX and VFIAX track the same index, meaning the dividend yield is basically identical.
The yield of VFIAX is around 1.42%, which means VFINX would have had a dividend yield of 1.42% also.
Comparison of Holdings: VFIAX vs. VFINX
Both VFIAX and VFINX aim to mimic the S&P 500 Index. Therefore, their core holdings comprise the same set of about 500 blue-chip U.S. companies across various sectors.
While VFIAX replaced VFINX, they would track the same companies as provided by the S&P 500 index.
Performance Comparison: VFIAX vs. VFINX
Over the past decade, the performance of VFIAX and VFINX has been practically identical due to their common objective of tracking the S&P 500. The main distinction lies in the expense ratio, which indirectly impacts the net return to the investors.
VFINX used to have a higher expense ratio of 0.14%, while VFIAX has an expense ratio of 0.04%.
The lower expense ratio of VFIAX gives it a slight edge in terms of higher net returns, but this difference barely affects the total long-term returns because of the funds’ relatively high correlation and similar holdings.
Which is Better for You: VFIAX or VFIAX?
Both VFIAX and VFINX have demonstrated favorable long-term returns and low expense ratios, making them attractive to different types of investors.
VFIAX, with its lower expense ratio, may be an ideal choice for investors with enough capital to meet the $3,000 minimum initial investment, seeking a cost-effective long-term investment solution.
VFINX, although now closed to new investors, can continue to serve as a solid S&P 500 index fund for its existing investors, given its strong past performance.
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Frequently Asked Questions
Is VFINX a good investment?
Though VFINX has closed for new investors, it was generally regarded as a high-quality investment. It offers broad exposure to the U.S. stock market. If you’re an existing investor in VFINX, you would want to switch to VFIAX.
Does VFINX have a minimum investment?
Yes, VFINX does have a minimum investment, but as mentioned earlier, VFINX is now closed to new investors. Originally, you needed a minimum amount of $3,000 to invest in VFINX.
VFINX is a discontinued Vanguard fund, which was replaced by VFIAX. This article will use historical data to give you an overview of these two funds.
Both funds track the S&P 500 index, one of the widely recognized equity benchmarks. Their price movements reflect the overall U.S. equity market, making these funds perfect core holdings in your diversified investment portfolio.
Frequently Asked Questions
Is VFINX a good investment?
Though VFINX has closed for new investors, it was generally regarded as a high-quality investment. It offers broad exposure to the U.S. stock market. If you’re an existing investor in VFINX, you would want to switch to VFIAX.
Does VFINX have a minimum investment?
Yes, VFINX does have a minimum investment, but as mentioned earlier, VFINX is now closed to new investors. Originally, you needed a minimum amount of $3,000 to invest in VFINX.
