VFIAX vs ITOT: Slight, but important differences

The Vanguard 500 Index Fund (VFIAX) and the Blackrock iShares Core S&P Total Stock Market ETF (ITOT) are two of the largest index mutual funds in existence and easily two of the most popular among individual investors. VFIAX and ITOT form the core of many investor portfolios and many investors compare VFIAX vs ITOT in order to decide which should be the foundation of their portfolio.

A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.

The Short Answer

There are two main differences between the funds. VFIAX is a mutual fund that holds large-caps and mid-caps, while ITOT is a total market ETF that includes small-caps. However, these are not major differences and investors should look at additional factors when deciding between the two funds.

The Longer Answer

Historical Performance: VFIAX vs ITOT

VFIAX was launched in late 2000, while ITOT was launched in January 2004. Since their common inception date, the performance difference has only been .12%. This difference has compounded over time and the cumulative performance differential over this time period is approximately 10%.

Selecting VFIAX vs ITOT is (at least partially) a bet on whether large-caps or small-caps will outperform in the future (although even a correct prediction will not make much of a difference since performance is pretty similar).

Portfolio Exposures: VFIAX vs ITOT

Geographic Exposure

Both VFIAX and ITOT hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical exposures.

Market Cap Exposure

VFIAX tracks the S&P 500 index and so it mostly holds large-caps with a bit of mid-cap exposure. ITOT tracks the broader S&P Total Stock Market Index and so it owns many more mid-caps and small-caps. In other words, VFIAX is a large-cap vehicle and ITOT is a total market vehicle. That being said, due to market cap weighting, both funds are overwhelmingly weighted towards large-caps.

Source: ThoughtfulFinance.com, Morningstar (data as of 1/31/2023)

Sector Weights

Despite the differences in market cap exposures, the sector exposures between the two funds is nearly identical as shown below.

Basic Materials2.52%2.72%
Consumer Cyclical10.38%10.72%
Financial Services13.99%14.04%
Real Estate2.88%3.59%
Communication Services7.83%7.22%
Consumer Defensive7.13%6.48%
Source: ThoughtfulFinance.com, Morningstar (data as of 1/31/2023)

Factors to Consider


Some investors may point out that the expense ratios between VFIAX and ITOT differ. This is true, but at a certain level, differences in expense ratio do not matter that much. In this case, the VFIAX’s expense ratio of .04% is 25% higher than ITOT’s .03% expense ratio. However, we’re talking about 1 basis point, so even though VFIAX is 25% more expensive than ITOT, it is inconsequential.

Transaction Costs

ETFs are free to trade at many brokers and custodians, including Vanguard. However, many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Vanguard does not participate in the pay-to-play arrangements (with their competitor custodians) that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is generally free to trade VFIAX or ITOT. However, only ITOT is free to trade in many non-Vanguard accounts.

There is a bid-ask spread when trading ETFs, but this spread is typically less than .01% for ITOT and individual investor trades will not generally be large enough to “move” the market. In the case of ITOT, individual investors should not have a problem trading.

Tax Efficiency & Capital Gain Distributions

ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). However, VTSAX does not make capital gains distributions (nor do I expect it to, due to Vanguard’s fund structure), so VTSAX and ITOT are both about as tax-efficient as possible.

Tax Loss Harvesting

My personal preference is to keep a portfolio entirely mutual funds or entirely ETFs, due to the mechanics of settlement during tax loss harvesting. If an ETF has declined in value and an investor sells it, the trade and cash proceeds will not settle for two business days (T+2). That investor may want to “replace” the sold ETF immediately and attempt to buy another ETF or mutual fund simultaneously.

However, mutual funds settle on T+1 basis, so cash for the mutual purchase would be due in one business day (which is one day earlier than the cash from the ETF sale is received). This can obviously cause problems and (even though this issue can be addressed with careful planning) I find it easier to keep accounts invested in similar vehicles. In this case, if a portfolio is all mutual funds, I might lean more towards VFIAX. If all ETFs, I might lean more towards ITOT.


VFIAX does have a stated minimum of $3,000 for purchases, although this may be too small an amount to buy in a non-Vanguard account where there is a transaction fee. The minimum purchase size for ITOT is typically one share, although fractional shares are becoming more common. Investors can trade ETFs intraday, as well as in the pre-market and after-hours trading sessions. Investors can only buy/sell mutual funds once per day. This is not necessarily a major factor for long-term investors however.

Final Thoughts on VFIAX vs ITOT

Both VFIAX and ITOT are large, core funds sponsored and managed by Vanguard and Blackrock, respectively. Although VFIAX is more of a large-cap mutual fund and ITOT is a total market ETF, performance has been extremely similar. ITOT has an edge in tradability and tax-efficiency, but these funds are effectively interchangeable in most other respects.

I would not spend too much energy splitting hairs to decide which one is “better” (unless one has a clear view on whether larger caps or smaller caps will perform better in the future and even then the difference won’t be much)! In my opinion, both funds are among the best out there and investors cannot really go wrong with either.

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