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Hi, my name is Psycho and I’m a recovering Vanguard investor.
Not how I usually start off an article, but in this case, very relevant. For in this article I’m going to answer a question I have been asked several times recently which is whether investors should buy shares in the Vanguard Total Stock Market Index Fund’s Admiral Share class (VTSAX).
I began investing in Vanguard index funds in 1988 after receiving a recommendation from an investment-savvy relative who knew I didn’t have the time or inclination to study investing. I first bought shares in the investor Class of the Vanguard Total Stock Market Index Fund (VTSMX) in 2004. When my balance was large enough, Vanguard converted my shares into shares of the Admiral Class version of the fund, VTSAX. I held them until just this past fall, when a series of extremely unpleasant experiences with Vanguard’s failing infrastructure and worse than incompetent Customer Service led me to convert them to shares in the Vanguard Total Stock Market ETF (VTI) and flee to a different brokerage.
In an ideal world, I would have preferred to remain invested in the mutual fund version of the Vanguard Total Stock Market Index fund, for reasons I will explain later on in this article. But for reasons that I will also explain further down in this article, I no longer think buying the mutual fund version of Vanguard funds that are also available in corresponding ETFs is wise.
A Brief Word About VTSAX’s Index Construction and Performance Characteristics
This article, unlike most of the articles I write about funds and ETFs, is not primarily about the holdings in the Vanguard Total Stock Market Index fund. It follows the exact same index as the Vanguard Total Stock Market Index ETF, because that ETF is just a share class of the same mutual fund as VTSAX. It’s worth noting that with typical US-Centrism, this fund calls itself “total stock market” but only holds stocks that trade on the US stock market. If you want a total world stock market fund you will need to invest in the Vanguard Total World Stock Index Fund (VTWAX) or its ETF partner, (VT).
I discussed in detail how the index that VTI follows is constructed and how it compares to its main competitor, the Vanguard S&P 500 ETF (VOO) in an earlier article, VOO Vs. VTI Smackdown: Know How They Differ Before You Invest. So I will only give a brief summary of those differences here and suggest you read that article if you are thinking of investing in VTSAX.
There has always been only a very small difference between the performance …….