The Vanguard Total Stock Market Index Fund (Admiral Shares) (symbol VTSAX) and the Vanguard Total Stock Market Index Fund (Investor Shares) (symbol VTSMX) are two of the largest and most popular total market index funds. Some compare VTSAX vs VTSMX not realizing that they are just two different share classes of the same 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
VTSAX and VTSMX are different share classes of the same portfolio. VTSMX is closed to new investors, so it is not possible to buy unless you already own VTSMX.
If you already own VTSMX and are considering buying more, the decision to buy VTSMX or VTSAX depends on investor-specific factors (some of which are listed below). Additionally, Vanguard allows owners of many Investor Shares to convert their shares to Admiral Shares or ETF shares.
If you do not own VTSMX, then both VTSAX and VTI (the ETF share class) are options.
The Longer Answer
Vanguard offers multiple shares classes for many funds. The Investor Shares are being phased out and Vanguard is pushing the Admiral Shares and the ETFs now. In other words, VTSAX and VTSMX are not two funds pursuing an identical strategy; they are the same fund!
Historical Performance: VTSAX vs VTSMX
VTSMX was launched back 1992, while VTSAX was launched on November 13, 2000. Since that time, performance has been identical: 7.21 vs 7.31% annually. Despite changes in fees and expenses over the past 22 years, the cumulative difference in performance over that time period is only 10%! Looking at the chart of VTSAX vs VTSMX below, it is obvious that they are identical.
Differences Between VTSAX and VTSMX
Since the two funds are actually two share classes of the same fund, I will skip the usual comparisons here. The geographic exposures, sector weights, market cap coverage so on is identical because the two funds are shares in the same portfolio. There are some resources on the internet indicating differences, but that is incorrect because they are the same fund!
Factors to Consider
Some investors may point out that the expense ratios between Vanguard’s Admiral Shares and Vanguard’s Investor Shares differ. This is true, but it is also reflected in the net performance chart above. At a certain level, differences in expense ratio do not matter that much. In this case, the difference in annualized performance is equal to the difference in expense ratio. Since these funds are identical, I would most likely lean towards VTSAX although getting the allocation is more important than selecting the “right” fund.
Neither fund charges purchase or redemption fees, so they should be free to trade at Vanguard. To my knowledge, Vanguard does not participate in the pay-to-play arrangements that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Vanguard, it is free to trade VTSAX or VTSMX. However, there will likely be a cost to buy or sell on other platforms.
Investors planning smaller allocations or expecting a lot of transactions may want to consider VTI, the ETF share class of this strategy.
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, since Vanguard ETFs are a share class of their mutual funds, the mutual funds are able to benefit from this feature of the ETF. In other words, both VTSAX and VTSMX benefit from VTI’s tax-efficient mechanisms.
Both VTSMX and VTSAX made capital gains distributions prior to VTI’s launch in 2001. However, neither fund has a made a capital gains distributions since then! As the below history of distributions shows, things changed once VTI was launched in 2001. In other words, VTSMX and VTSAX are equivalent in terms of tax efficiency.
Tax Loss Harvesting
On this topic, investors should probably avoid using these two funds as tax loss harvesting substitutes for one another since they would likely be considered “substantially identical.”
As mentioned above, VTSMX is closed to new investors. So unless you already own VTSMX, you may want to consider VTSAX or VTI.
VTSAX does have a stated minimum initial purchase of $3,000, so that may be a factor for some investors looking to initiate a position.
The minimum purchase size for VTI 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: VTSAX vs VTSMX
VTSAX and VTSMX are literally the same. However, investors should consider the above factors when deciding which one is best for them (if they are able to buy VTSMX at all).