Investing, Simplified: How Vanguard’s Total Market Index Funds Makes It Easy

Put your quest for financial independence on easy mode with Vanguard’s total market index funds. 

The company offers some of the best total market exchange-traded funds available. 

Disclosure statement: We’re customers of Vanguard but not affiliated with them in any sales or professional capacity. We don’t make money if you purchase Vanguard funds. All opinions are our own, developed as customers. This review of Vanguard is not to be construed as investment advice. Please speak with a financial professional for specific investment advice. 

Why Vanguard

I prefer Vanguard to all the other total market funds on the market. Vanguard has a stellar reputation, low investment fees and was one of the first companies to offer a total market index fund. 

In addition to fund brokerage, Vanguard offers professional investment advice (for a fee) and numerous free resources to help clients plan their financial journeys. The website features a retirement income calendar and expense worksheet, investment analysis tools, and college savings calculators. 

Which Vanguard Fund Should I Choose

Vanguard offers a wide range of index funds. Savvy investors should research each fund and determine which works best based on their goals (growth vs. value, time horizon, etc.). 

We’re not here to review every fund Vanguard offers. Instead, we want to discuss a specific type of fund: Vanguard’s Total Market Index Fund. 

What’s a Total Market Index Fund?

A total market fund is an index fund that captures the entire US equity market. Theoretically, it’s invested in every stock available in the United States. In practice, it’s invested in a broad range of equities with significant diversification.

This diversification makes the fund less volatile, which means investors experience less risk even during a financial downturn. 

However, that doesn’t mean there is no risk. Total market index funds help mitigate risk, but no investment is 100% risk-proof.  In a severe financial downturn, the funds, like anything else, WILL lose value. 

However, it’s less likely that the entire fund will go belly up, meaning if you stay invested throughout the financial crisis, you’ll likely recoup your losses.

“Likely” doesn’t mean a sure thing.  It’s still an investment, so nothing is guaranteed. Vanguard Index Funds aren’t FDIC insured, so if Vanguard the company goes under, you can still lose your investment portfolio. Hopefully, that’s unlikely, but you never know. 

Vanguard’s Total Market Index Funds

Vanguard’s total market index funds include a mix of small-range, mid-range, and large-range stocks and a mix of value versus growth stocks. The fund also includes a wide array of sectors, like energy, health care, consumer goods, and technology. 

Vanguard offers two total market index fund options: the mutual fund (VTSAX) and the exchange-traded fund (ETF) (VTI). 

The two funds include the same holdings, investing in small-cap, mid-cap, and large-cap stocks and growth and value stocks. 

However, there are key differences. 

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

Vanguard’s Total Stock Market Admiral Shares fund is a mutual fund with a minimum investment of $3000. After your initial investment, you can buy additional shares for as little as a dollar. 

VTSAX is an excellent fund for someone who wants to track the whole market and use dollar-cost averaging to add to their investment. 

With an expense ratio of only .04%, it has one of the best values in the market. 

Vanguard Total Market Fund Exchange Traded Fund (VTI)

VTI acts more like a traditional stock than a mutual fund. There’s no minimum buy-in amount, but you must pay brokerage fees to buy and sell. 

You can’t set up automatic investments from your paycheck if you choose the ETF. You must purchase additional shares through the exchange, using the “buy” and “ask” prices, paying the brokerage fee each time.  The minimum buy-in amount is always the price of a total share – you can’t invest a dollar and get a partial share like you can in the mutual fund. 

VTI is ideal for people who want to buy and hold but aren’t interested in regularly adding to the investment. It’s also great for new investors who may not have $3000. They can buy smaller amounts and switch to the mutual fund when their investment grows. 

VTI has the same expense ratio of .04%. 

Which Total Market Fund Should You Choose?

Although investing is a personal decision based on your individual goals, VTSAX is the better option for most people with over three thousand dollars to invest. When I first started investing, I chose the admiral shares because I had 10 thousand dollars, and I wanted to automatically invest more every paycheck. 

VTSAX offers more flexibility for less. It lets you set up automatic investing, buy partial shares, and avoid brokerage fees. 

VTI gives people who don’t have $3000 a way to get started. 

Vanguard Simplifies Investing

Investing seems complicated and confusing, especially for those who didn’t learn personal finance in school. 

Vanguard makes it easy. It has tons of great index funds providing opportunities for even greater diversification and plenty of tools to help novices decide which investments are right for them. 

If you’re looking for a great total market index fund, check Vanguard out.