Vanguard Total Stock Market Index Fund vs. Vanguard 500 Index Fund: What’s the Difference?

Vanguard Total Stock Market Index Fund vs. Vanguard 500 Index Fund: An Overview

Two of Vanguard’s most popular products are the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and the Vanguard 500 Index Fund Admiral Shares (VFIAX). While both can function as suitable core holdings in a stock portfolio, these similar-sounding mutual funds pursue different investment strategies.

As its name implies, the Total Stock Market Index Fund provides exposure to the entire U.S. equities market, as represented by the Center for Research in Security Prices (CRSP) U.S. Total Market Index of nearly 4,000 stocks.

On the other hand, the 500 Index Fund only provides exposure to 500 of the largest U.S. companies, similar to the S&P 500 Index.

In this article, we’ll review some of the similarities and differences between these two popular Vanguard mutual funds.

Note that there are two classes of the Vanguard Total Stock Market Index Fund and the Vanguard 500 Index Fund: Admiral shares and Investor shares. Investor shares of both funds—the Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) and the Vanguard 500 Index Fund Investor Shares (VFINX)—are no longer open for new investment. The only difference between Admiral and Investor share funds is the minimum required investment.

Vanguard Total Stock Market Index Fund (VTSAX)

The Vanguard Total Stock Market Index Fund (VTSAX) is a mutual fund that provides diversified exposure to small-cap, midcap, and large-cap, as well as, growth and value stocks traded on the Nasdaq and New York Stock Exchange (NYSE).

The fund employs a representative sampling approach to approximate the entire index and its key characteristics.

As of Dec. 30, 2021, the fund held 4,149 stocks and controlled net assets of $300 billion. Technology, financial, industrial, healthcare, and consumer service companies make up its largest holdings. VTSAX charges an extremely low expense ratio of 0.04% and requires a minimum investment of $3,000.

Top 10 Holdings

The top 10 holdings of VTSAX are (as of end of year 2021):

Vanguard 500 Index Fund (VFIAX)

The Vanguard 500 Index Fund (VFIAX)—the first index fund for individual investors, according to the company—provides exposure to a subset of the entire U.S. equity market: the Standard & Poor’s 500 (S&P 500) Index, whose component companies account for about three-fourths of the U.S. stock market’s value.

The Vanguard 500 Index Fund seeks to replicate its benchmark index by investing its total net assets in the stocks comprising the index and holding each component with approximately the same weight as the index. In this way, the fund barely deviates from the S&P 500, which it is designed to mimic. 

As of Dec. 30, 2021, the Vanguard 500 Index Fund had $280 billion in total net assets and, despite its name, holds 512 stocks. Like its sister fund, VTSAX charges an expense ratio of 0.04% and requires a minimum investment of $3,000.

Top 10 Holdings

The top 10 holdings of VFIAX are (as of end of year 2021):

Key Differences

In comparison to the Vanguard Total Stock Market Index Fund, the Vanguard 500 Index Fund has historically experienced slightly lower volatility and return. However, the Sharpe ratios (the most widely used method for calculating risk-adjusted return) are nearly identical, which indicates that investors in both funds had similar returns on a risk-adjusted basis.

The Vanguard Total Stock Market Index Fund is best suited for moderately to highly risk-tolerant investors seeking low-cost exposure to the U.S. stock market. Additionally, it could function as a single domestic equity fund in a portfolio.

Meanwhile, the Vanguard 500 Index Fund is suitable as a core equity holding for investors with a long-term investment horizon and a preference for the lower risk of the large-cap equity market. Since it concentrates on more conservative, large-cap stocks, the fund might work best in a diversified portfolio that contains exposure to other types of equities for growth.

Frequently Asked Questions