VFIAX vs. VTI - Which is Better For You?
The Vanguard 500 Index Fund Admiral Shares (VFIAX) and Vanguard Total Stock Market ETF (VTI) are both popular options for a core investment holding.
Let’s take a closer look at these funds to determine which is better for you!
VFIAX vs. VTI Overview
The main difference between VFIAX and VTI is that VFIAX is a mutual fund, and VTI is an ETF.
VFIAX (Vanguard 500 Index Fund Admiral Shares) is a type of mutual fund provided by Vanguard. Launched in November 2000, it aims at replicating the S&P 500, offering divergent exposure to 500 of the biggest U.S. companies representing various sectors of the U.S. economy.
On the other hand, VTI (Vanguard Total Stock Market ETF) is an exchange-traded fund that tracks the CRSP US Total Market Index. Launched in May 2001, the VTI seeks to mimic the performance of a benchmark index that measures the investment return of the overall US equity market, including small, medium, and large-cap growth and value stocks regularly traded on the New York Stock Exchange and Nasdaq.
Both VFIAX and VTI are passively managed funds incurring relatively low costs.
Expense Ratio Comparison
VFIAX - 0.04%
VTI - 0.03%
It’s important to pay acute attention to a fund’s expense ratio, as high fees can notably diminish your investment return over time.
VFIAX sports an expense ratio of 0.04%. Compared to other industry offerings, this is quite low and one of its appeals to investors.
On the other hand, VTI has an even lower expense ratio at 0.03%, an aspect that further amplifies its appeal. It’s clear then while both funds offer low-cost investment solutions, VTI edges out VFIAX with its lower expense ratio.
Dividend Yield Comparison
VFIAX - 1.42%
VTI - 1.60%
Both VFIAX and VTI pay a relatively similar dividend yield as they are both broad-market ETFs with plenty of dividend-paying holdings.
VTI pays a slightly higher dividend, so it may be better for investors specifically seeking income.
However, there are many other dividend funds from Vanguard, like VIG and VYM, that pay a higher dividend yield than both.
Holdings Comparison
Both VFIAX and VTI offer broad market exposure but they do differ in the composition and the extent of their holdings.
VFIAX attempts to track the S&P 500, giving the investors exposure to 500 of the largest U.S. companies spread across diverse sectors like Information Technology, Healthcare, Financials, etc.
Alternatively, VTI offers more extensive exposure. It includes holdings in the largest U.S. companies (similar to those in VFIAX) but also in mid and small-cap companies, encapsulating approximately 99.5% or more of the total market capitalization of the entire U.S. equity market.
With over 3500 equity holdings, VTI is more diversified than VFIAX.
Performance Comparison
Historically, the S&P 500 has outperformed the total stock market funds since large-cap companies have been extremely bullish.
Normally, in conditions of market prosperity where large-cap stocks outperform, VFIAX might experience higher returns because of its concentration on large-cap stocks.
Conversely, in other market phases wherein small and mid-cap stocks do better than large-cap ones, VTI, with its wider exposure, could outperform VFIAX.
Which is Better For You?
In the end, the question of whether VFIAX or VTI is better for you is highly subjective and depends entirely on your individual situation and strategy.
If you seek extensively diversified exposure to the US equity market, including small and mid-cap stocks, VTI would be more suitable.
However, if you prefer focused exposure to large-cap stocks and are comfortable with traditional mutual funds, VFIAX could be your pick.
If you want to learn more about investing in the stock market, you can join the HaiKhuu Trading Community.
HaiKhuu offers live trading calls, daily morning reports, and an awesome community of like-minded traders to learn from.
FAQ
What is the VFIAX equivalent to?
VFIAX is the mutual fund equivalent to the Vanguard S&P 500 ETF (VOO). They both aim to track the S&P 500 index, which includes the 500 largest U.S. companies. Each share of VFIAX or VOO gives you exposure to these businesses, making either an excellent way to invest in the U.S. economy at large.
