VTSMX vs. VTSAX: A Detailed Comparison
The VTSMX Vanguard fund is closed to new investors and was replaced by VTSAX and the ETF version VTI.
This article will compare VTSMX vs. VTSAX using historical data about VTSMX to show how they compare.
Key Characteristics
VTSMX
VTSMX is an open-ended mutual fund launched and managed by Vanguard. It seeks to mirror the performance of the CRSP US Total Market Index. Despite being closed to new investors, it serves as a one-stop-shop for existing investors with broad exposure across the sectors and a vast diversified portfolio.
VTSAX
VTSAX is an index fund also launched and managed by Vanguard. This Admiral Shares mutual fund looks to copy the investment returns of the CRSP US Total Market Index, encapsulating the entire U.S. equity market.
Performance Comparison
Performance-wise, as mentioned earlier, their close correlation proposes near-identical returns. Both funds have shown substantial and consistent growth over the years.
It’s also critical to note that since VTSMX has the same core holdings as VTSAX, any disparity in performance doesn’t stream from differing assets but rather from expense ratios and dividend handling, discussed later in the next sections.
Dividend Comparison
When it comes to dividends, VTSMX and VTSAX have provided reliable returns. Both primarily distribute dividends quarterly, in March, June, September, and December, with any capital gains distributed annually in December.
As for the specifics, VTSAX and VTSMX’s dividend yield has typically lingered around 1.38%.
Expense Ratio Comparison
The expense ratio is one area where VTSAX distinctly outranks VTSMX. As an Admiral Fund, the VTSAX has a meager expense ratio of 0.04%, considerably lower than VTSMX’s 0.14% bracket.
Luckily for investors, Vanguard decided to lower the expense ratio to 0.04% for VTSAX, which replaced VTSMX.
Correlation
In terms of correlation, both VTSMX and VTSAX track the same total U.S. stock market index, the CRSP US Total Market Index. This index is a cap-weighted index, meaning companies with larger market values have a higher influence on the index’s performance. Consequently, both funds exhibit almost parallel performance trajectories and volatility measures because they hold the same underlying stocks.
To put it into perspective, these funds’ portfolio compositions are similar, making their correlation close to 1—the strongest positive relationship possible. Thus, fundamentally, their behavior in the marketplace should be pretty consistent, with both likely to rise or fall synchronously with U.S. equities.
Which is Better For You?
Obviously, you can’t buy VTSMX anymore, so your better choice for a total stock market fund is either VTSAX or VTI.
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FAQ
Is VTSMX closed to new investors?
Yes, VTSMX is currently closed to new investors. Vanguard made the decision to stop accepting new investors into VTSMX, directing them towards funds like Vanguard Total Stock Market ETF (VTI) or Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).
Is it better to buy VTSAX or VTI?
Your decision between VTSAX and VTI (Vanguard Total Stock Market ETF) should rest upon your inclination for a mutual fund or an ETF. Both VTSAX and VTI track the same index, offering exposure to the whole U.S. stock market. If you prefer having the ability to trade throughout the day, like stocks, go for VTI. On the other hand, if you prefer a traditional mutual fund structure, VTSAX fits the bill.
