VTSAX vs SPY

State Street’s SPDR S&P 500 ETF Trust (SPY) and the Vanguard Total Stock Market Index fund (VTSAX) are two of the largest funds in existence and easily two of the most popular among individual investors. SPY and VTSAX are the core of many investor portfolios and many investors compare VTSAX vs SPY in order to decide which should be the foundation of their portfolio.

The Short Answer

The main difference between SPY and VTSAX is that SPY is a large- and mid-cap ETF, while VTSAX is a total market mutual fund. Despite these differences, the total return between these two funds is nearly identical and I consider them interchangeable for all intents and purposes.

A quick reminder that this site does NOT provide investment recommendations.

The Long Answer

Historical Performance: VTSAX vs SPY

SPY was the first ETF ever launched in the US (January 1993), while VTSAX was launched on November 13, 2000. Since then VTSAX has outperformed by roughly .36% annually. This is most likely driven by small-caps’ relative outperformance initially, even though that trend has reversed during the past decade. Despite variations in the size factor performance over the decades, the long-term performance between these two funds is incredibly similar.

Differences between VTSAX vs SPY

The biggest difference between SPY and VTSAX is the market cap exposure of the funds. SPY tracks the S&P 500 index which includes mostly large-caps and some mid-caps, while VTSAX covers much more of the market by including more mid-caps and small-caps.

Geographic Exposure

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

Market Cap Exposure

SPY focuses on the S&P 500 index and so it mostly holds large-caps with a bit of mid-cap exposure. VTSAX tracks the broader CRSP US Total Market Index and so it owns many more mid-caps and small-caps (SPY data as of 12/7/2022, VTSAX data as of 10/31/2022). In other words, SPY is a large-cap vehicle, while VTSAX is a total market vehicle. That being said, due to market cap weighting, both funds are overwhelmingly influenced by the large-cap holdings.

SPYVTSAX
Large-Cap84%73%
Mid-Cap16%19%
Small-Cap0%9%
Source: ThoughtfulFinance.com, Morningstar

Sector Weights

The sector weights between SPY and VTSAX are nearly identical (SPY data as of 12/7/2022, VTSAX data as of 10/31/2022).

SPYVTSAX
Basic Materials2.44%2.51%
Consumer Cyclical9.99%10.66%
Financial Services13.65%13.79%
Real Estate2.79%3.45%
Communication Services7.38%6.80%
Energy4.96%5.31%
Industrials8.97%9.64%
Technology23.41%23.06%
Consumer Defensive7.54%6.75%
Healthcare15.81%15.17%
Utilities3.06%2.87%
Source: ThoughtfulFinance.com, Morningstar

Final Thoughts: VTSAX vs SPY

Both SPY and VTSAX are large, core funds sponsored and managed by State Street and Vanguard respectively. Although SPY is more of a large-cap ETF and VTSAX is a total market mutual fund, performance has been nearly identical. I view these two funds as essentially interchangeable and would not spend too much energy trying to decide which one is “better.”

However, there are some situations that may call for one fund versus another.

  • Many custodians offer free ETF trades, but charge trading fees or redemption fees for mutual fund. So unless my account was at Vanguard, I might opt for SPY.
  • If most of my existing portfolio was mutual funds, I might stick to mutual funds so that settlement periods for trades are consistent (for activities like tax-loss harvesting, etc). Similarly, if most of my portfolio was ETFs, I might stick to ETFs.
  • The ETF structure is generally a more tax-efficient vehicle, so SPY may have a lower risk of adverse tax situations in the future.

Despite these considerations, these two funds are very similar for all intents and purposes.

Posted by Matt

Matt is an investor and investment adviser. He is a CFA charterholder and a CAIA charterholder. His writing on this site is purely educational; he will not make recommendations on this site since he does not know individual readers' situations.