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What’s the Difference Between VTI and VTSAX?
The simplest way to get started investing is with low-cost index funds.
And my favorite kind of index fund is the total stock market index fund. By owning just one fund you achieve instant diversification across virtually all publicly traded companies.
There are many firms that offer total stock market index funds. But Vanguard literally invented the category.
Their total stock market index fund (VTSAX) is the gold standard against which I compare everything else.
Today we’re putting VTSAX up against its close cousin, VTI.
The two are very similar, yet have some important differences. Which one is right for you is going to depend on how much you have to invest, how militant you are about costs, and how much you value convenience.
VTI vs. VTSAX: The Difference in a Nutshell
Here are two of the most important similarities between VTI and VTSAX:
- Both are offerings of the Vanguard Group
- They both track the CRSP US Total Market Index
But there are four key differences that we’ll explore. And three of the four are related to the two different fund types represented.
You see, VTSAX is a traditional mutual fund while VTI is and exchange traded fund (ETF).
A mutual fund is way for investors who don’t know each other to pool their resources to achieve diversification. Instead of buying stocks directly, you and other investors buy ownership shares of a fund, and the fund buys the stocks.
So you can think of a investing in a mutual fund like investing in a basket of assorted stocks.
Whereas investing in an ETF is more like…investing in a basket of assorted stocks.
Wait, so how exactly are the two different again?
Probably the most common answer is that ETF shares can be bought and sold during the day like stocks, but mutual fund transactions process at the end of the day after the market has closed. So you can day-trade ETF’s, but not mutual funds.
This is a true difference between the two, but not one that I care about. As an…
