*If you’re here from my video, you can download the VTSAX Cheat Sheet at the bottom of the article.

When it comes to index funds, VTSAX (Vanguard Total Stock Market Index Fund) stands out as one of the largest and most diversified options available. With $1.7 trillion in assets, it’s clear why this Vanguard fund is highly regarded by investors worldwide. But is bigger always better? In this article, we’ll dive into what makes VTSAX unique, its performance, and whether it’s truly the best index fund for you.

What Is VTSAX?

VTSAX, or the Vanguard Total Stock Market Index Fund, is designed to give investors exposure to the entire U.S. stock market. The fund holds over 3,677 stocks, ranging from small-cap to large-cap companies, making it highly diversified.

This level of diversification is crucial for minimizing risk. If one stock underperforms or even goes out of business, the impact on your investment is minimal because you’re spread across a broad market.

Why Diversification Matters

Diversification is a cornerstone of investing. If you put all your money into a single stock and it fails, your entire investment is at risk. However, investing in an index fund like VTSAX, with thousands of stocks, reduces that risk significantly. Even if several companies within the fund perform poorly, the overall impact on your portfolio is relatively small.

With over 3,600 stocks, VTSAX offers a level of security and peace of mind that few other funds can provide.

Key Features of VTSAX

Ticker Symbol: VTSAX
Total Assets: $1.7 trillion
Total Number of Stocks: 3,677
Expense Ratio: 0.04%
Minimum Investment: $3,000
Dividend Yield: 1.37%
Top Holdings: Apple, Microsoft, Nvidia, Amazon, Meta (Facebook)

Vanguard’s low-cost model is one of the key attractions of VTSAX. With an expense ratio of just 0.04%, it’s one of the cheapest funds to invest in. For every $1,000 invested, you’re only paying 40 cents in fees annually, making it a cost-efficient way to access the broad stock market.

Performance of VTSAX

The historical performance of VTSAX speaks for itself. If you had invested $10,000 in VTSAX back in November 2000, your investment would now be worth approximately $66,172 by September 2024. This is an 8.25% annual rate of return, demonstrating strong growth over time.

However, it’s important to remember that like any other stock market investment, VTSAX isn’t immune to downturns. For much of the 2000s, the fund experienced lackluster performance, but long-term investors saw significant growth from 2010 onwards.

Hypothetical Growth of VTSAX

To help new investors visualize potential returns, here’s a hypothetical breakdown:

A 12% rate of return over 20 years could turn $10,000 into $95,694.
At a more conservative 5% rate of return, your $10,000 could still grow to $26,533 over 20 years.

Even with a 0% return, due to its low expense ratio, you would only lose a small amount of your principal over time.

Top Holdings in VTSAX

A significant portion of VTSAX is invested in some of the largest U.S. companies:

Apple – 6.07%
Microsoft – 5.84%
Nvidia – 5.13%
Amazon – 3.29%
Meta (Facebook) – 1.95%

These top five holdings make up 22.2% of the fund, meaning a large portion of VTSAX’s performance is tied to the performance of these industry giants.

Comparing VTSAX to Other Index Funds

While VTSAX is a fantastic option, it’s not the only one available. Some investors may prefer alternatives depending on their broker. For example:

Schwab Total Stock Market Index Fund (SWTSX)
Fidelity Total Market Index Fund (FSKAX)

Both SWTSX and FSKAX offer similar broad-market exposure but may have advantages for those using Schwab or Fidelity brokerage accounts, respectively. If you’re investing through a non-Vanguard broker, be aware that some charge transaction fees for VTSAX. For example, Charles Schwab charges $74.95, and Fidelity charges $100 to purchase VTSAX.

Morningstar Ratings for VTSAX

According to Morningstar, VTSAX has a 3-star rating across 3-year, 5-year, and 10-year periods. While these ratings indicate that it’s a solid fund, it’s not necessarily the best-performing fund in its category. However, the low fees and high diversification still make it a popular choice for long-term investors.

Is VTSAX the Best Index Fund for You?

So, is VTSAX the best index fund? The answer depends on your investing style and brokerage account. If you’re a Vanguard customer, VTSAX is likely a top-tier choice, offering both low fees and broad market exposure. But if you use Schwab or Fidelity, consider the additional transaction fees before deciding.

Conclusion

With its low fees, broad diversification, and strong historical performance, VTSAX remains one of the best index funds for long-term investors. It offers exposure to the entire U.S. stock market, making it a smart choice for those looking to build wealth over time.

If you’re ready to invest in VTSAX, or want to compare it with similar options, be sure to consider your brokerage fees and long-term goals. For many, VTSAX is a simple, low-cost way to take advantage of the growth potential in the stock market.

Get Your Free VTSAX Cheat Sheet Want to learn more about VTSAX? Download my VTSAX Cheat Sheet for free! It includes all the key information, plus the historical performance, expense ratios, and more. Just click the link below to grab your copy and take the next step in mastering the index fund.

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