I finally bought my Vanguard Total Market fund! I’ve heard amazing things from tons of people about this fund (the biggest perk being the instant diversification), so after a lot of my own research, I decided to buy in. If you are serious about your quest for financial freedom, you should definitely look into investing in a total market fund. As you could probably tell, I prefer Vanguard.
Which one though?
Apparently, there are three different funds that you can buy which are technically “Vanguard Total Market” funds. I had no idea! I knew I wanted the total market fund, but I had no idea what the difference was between these three. Time for more research! But luckily for you, I did the research so you don’t have to!
Vanguards Investor Shares fund is a mutual fund with holdings in the full range of the equity market. This fund invests in small cap, mid cap, and large cap stocks in addition to growth and value stocks. The minimum buy-in amount for this fund is three thousand dollars, and the minimum additional investments are only one dollar. This is a great fund for someone who wants to track the whole market and also wants to use dollar cost averaging to add to their investment. The expense ratio for this fund is .15%, which is well below average.
The admiral shares index fund is pretty much exactly the same as the investor fund. The only differences are higher buy-ins and lower expense ratios. If you have ten thousand dollars to invest and want to keep adding to your investment, the admiral shares are definitely the way to go (this is what I bought!). If you can only scrape together three grand but want the same re-investment privileges, you should go with the investor shares. Just be sure to switch it over to Admiral shares once you reach the 10K mark! There is no reason to pay more in expense ratio fees than absolutely necessary. The expense ratio for the admiral shares is only .04%! It’s a total steal!
If you are not interested in adding more money to the fund (outside dividend re-investments) then getting the ETF may be a better option for you. The expense ratio is the same as with the Admiral Shares (.04%!) and there is no minimum buy in amount! The problem with this fund is that you can’t add to it automatically from your paycheck like you can with the other two. This ETF works more like an individual stock, where you have to go in and do the whole “ask” price thing. You have to buy full amounts at the market price when you place an order, and you will probably have to pay a brokerage fee each time (which varies depending on which platform you use for trading). You can buy more of this ETF whenever you want, but its not as easy to set up automatic investing.
which one should I chose?
Like I said before, I chose the admiral shares because I had 10 thousand dollars to invest and I wanted to automatically invest more every paycheck. If you have 10 thousand dollars or more, this is the absolutely the best option, because it has the same expense ratio as the ETF, and gives you the option to add the automatic investing (and even if you don’t want that now, you never know, you may in the future).
But not everyone has 10K to dump into a fund, and if you don’t the fund you should chose depends on what your goals are. If you have less than 3K to invest the ETF is probably best for you (unless you want to save up 3K before investing, always an option!). However, If you have between 3K and 10K but don’t have any desire to set up automatic investing, the lower expense ratio of the ETF makes it a better option. But if you have between 3k and 10K and plan to set up automatic investing, the investors share fund is probably going to work best for you.
Clear as Mud?
I know investing can be confusing. I love that Vanguard makes investing in the stock market super easy, especially for the lay person. And hopefully, this short post can hep you decide which Vanguard Total Market Fund will best meet your needs.
For the sake of a full disclosure, you should know that I have absolutely no affiliation with Vanguard other than having my own account. I will not make any money if you click one of the links, open a Vanguard account, or buy into one of the three accounts I wrote about. I’ve written this post because I have an account with Vanguard, I believe in their product, and I was confused when trying to figure out which fund to purchase. I’m not gonna lie though, if Vanguard had an affiliate program I’d sign up in a heartbeat, because I truly believe in their product (and I’m only going to add affiliate links for products that I believe will add value to your life).