Want to buy Vanguard’s VTSAX Index Fund? Don’t miss these 5 things you should know before you buy.
If you are interested in buying index funds, it is more than likely that Vanguard’s VTSAX fund has been recommended as an investment.
However, before you buy VTSAX and add it to your portfolio, there are a few things we wanted to bring to your attention to help you decide if this index fund is right for you.
If that sounds good, let’s jump in and get to the top 5 things we think you should know before investing in this popular Vanguard index fund.
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1. Structure of the VTSAX Index Fund
VTSAX is Vanguards’ Total Stock Market Index Fund Admiral Shares. It seeks to track the performance of its benchmark index, the CRSP US Total Market Index.
It holds a mix of large, mid, and small-cap stocks with a mix of both growth and value stocks.
The goal is to provide exposure to the entire US stock market.
VTSAX is not an S&P 500 index fund.
Its benchmark index (CRSP), contains all of the available publicly traded companies in the US market. That means that when a company has an IPO, then it is included in this index.
This means that the VTSAX index fund can invest in companies during their IPO.
This can be seen as an advantage because you can potentially get in early on a young company that could turn into a future market leader.
For example, the VTSAX index fund invested in TESLA back in 2010, and the fund investors were able to be part of the fast-growing ride and high returns before Tesla qualified as an S&P 500 company.
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2. Ideal For Financial Independence and Retiring Early
VTSAX is great if you are looking for a fund you can invest in and maximize the efficiency of the use of your money to retire early.
VTSAX allows you to get diversification, has a good history of returns, and provides a dividend that you can reinvest.
Additionally, the VTSAX index fund gives you exposure to high-quality companies just by owning this one index fund.
Low Cost
VTSAX is a passively managed index fund and has one of the lowest expense ratios in the industry.
It’s a set it and forget it strategy that simplifies the long-term investing process.
3. Great Return On Your Investment
Over the last 10 years, VTSAX has done a great job mimicking its benchmark.
Since it was created, it has had an average annual return of over 8%.
On top of that, if you had invested $10k back in 2011, it would be worth over $37k now.
4. Intial Investment Required
In order to get into the fund, you must initially invest a minimum of $3k. Now you may think to yourself, with a $3k minimum why is VTSAX so popular?
People like VTSAX is because it is a vanguard index fund. Vanguard is a unique broker because it’s a company that is owned by its investors.
Vanguard can use this to its advantage to show that its funds prioritize its investors first rather than worrying about the stock price or generating a profit for private owners.
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5. Alternative Index Funds To Invest In
Here are some other Index funds that we feel are good alternatives to VTSAX.
Fidelity has a total market fund with the ticker symbol FSKAX and the Fidelity ZERO Total Market Index fund ticker symbol FZROX.
FZROX has no management fees and no minimum to invest.
Charles Schwab also has an alternative called the Schwab total market Index fund SWTSX which is also worth mentioning.
This fund along with the Fidelity index funds mentioned, has no minimum and actually has a lower expense ratio than VTSAX.
Conclusion
VTSAX is a great fund if you are a beginner and you are looking to minimize your risks and be paid a dividend at the same time.
That being said, the initial investment fee can be steep for most people to begin investing.
There are alternatives on the market with competitive brokers that can provide the same stability and pay dividends as well.
It is important to do your research before buying any investment. We hope this article was able to give you some insight before buying Vanguard’s VTSAX index fund.
If you would like to invest long term but don’t know where to start, you should purchase our Stock Market Starter Kit.
In less than 2 hours, you will be able to confidently buy your first stock market investment on your own.
5 Things You Need To Know Before Buying VTSAX Index Fund!
Nadia is a Financial Independence Coach from New York City. She holds a B.A from Columbia University and worked 13+ years in Investment Banking and Financial Services. She is an entrepreneur, investor, and partner at Wealth Twins LLC. She reached Financial Independence in her 30’s and is passionate about showing others how to achieve the same.
