VOO vs. VTSAX: Which Is the Better Fund for You?

Vanguard’s VOO vs VTSAX have become popular choices for many investors who are seeking exposure to the US equity market while keeping costs low . In this article we will analyze the features of these two investment options and help you determine which one suits your needs .

Understanding the Basics

VOO or the Vanguard 500 Index Fund ETF is an exchange-traded fund that passively tracks the S&P 500 index . It consists of about 508 stocks and has a net asset value of around $620 billion . On the other hand VTSAX or the Vanguard Total Stock Market Index Fund Admiral Shares is a passively managed mutual fund that tracks the CRSP US Total Market Index and includes small, mid and large-cap companies . VTSAX has a net asset value of up to $1 trillion .

Key Differences

The main difference between VOO and VTSAX is in their structure and market cap exposure . VOO as an ETF tracks the S&P 500 index and focuses on large-cap and some mid-cap companies . VTSAX as a total market mutual fund covers broader market sections like mid-cap and small-cap companies . While both funds have overlaps in their portfolios VTSAX offers more exposure to mid and small-cap stocks .

Expense Ratios and Minimum Investment

When it comes to costs both VOO and VTSAX are considered low-cost options . VOO has an expense ratio of 0 .03% while VTSAX has an expense ratio of 0 .04% . However it’s worth noting that VTSAX requires a minimum investment of $3,000 whereas VOO does not have an initial investment requirement .

Performance and Diversification

In terms of performance both VOO and VTSAX have offered similar returns over the past five years . VOO mostly consists of large-cap stocks which makes up around 85% of its portfolio with the other 15% in mid-cap stocks . VTSAX has a more diversified portfolio with around 72% in mega and large-cap stocks and the other remaining 28% in mid small and micro-cap stocks .

Factors to Consider

When deciding between VOO and VTSAX there are several factors to take into account . If you prefer the flexibility of trading throughout the day VOO’s ETF structure may be more suitable . Additionally if your account is with a custodian that offers free ETF trades VOO may be a preferred option . On the other hand if your existing portfolio consists mainly of mutual funds sticking with VTSAX can provide consistency in settlement periods for trades .

Tax Efficiency and Investment Strategy

While both VOO and VTSAX are passively managed ETFs like VOO generally offer better tax efficiency . However it is important to note that Vanguard ETFs like VOO are share classes of Vanguard mutual funds which can impact the tax benefits . Overall both funds are well-regarded and their performance has been nearly identical .

Making the Decision

Ultimately the choice between VOO and VTSAX depends on your individual circumstances and preferences . Both funds offer low-cost investment options and have similar performance records . VOO and VTSAX are reliable choices for long-term investors whether you focus on the ability to trade throughout the day or prefer the consistency of mutual funds .