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 can probably tell, I prefer Vanguard.
Although there are a few total market funds on the market, I prefer Vanguard. They are a solid company, the grandfather of index fund investing, and have low investment fees. Vanguard also offers a variety of ESG funds for those looking for sustainable investment options. This company has it all!
Which Vanguard Fund?
Apparently, there are two different funds that you can buy which are technically “Vanguard Total Market” funds. I knew I wanted the total market fund, but I had no idea what the difference was between these two. Time for more research! But luckily for you, I did the research so you don’t have to!
Wait – What’s a Total Market Fund?
A total market fund is an index fund that is designed to capture the entire US equity market. In theory, that means it’s invested in every single stock available in the United States. However, in practice, it means that it’s invested in a broad range of equities with a lot of diversification.
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.
This diversification makes the fund less volatile, which means there is less risk for investors even in a financial downturn. However, that doesn’t mean there is no risk. Every investment has risk.
Here are the two options for Vanguard total market funds:
Vanguards Total Stock Market Admiral 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 only .04%, which is a total steal!
If you are not interested in adding more money to the fund (outside dividend re-investments) then getting the Exchange Traded Fund (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 VTSAX. 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 it’s not as easy to set up automatic investing.
Which Total Market Fund Should You Choose?
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 three 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 three thousand dollars to dump into a fund, and if you don’t it’s better to get started with investing however you can. If you have less than 3K to invest the ETF is a good place to start(unless you want to save up 3K before investing, always an option!).
I know investing can be confusing. I love that Vanguard makes investing in the stock market super easy, especially for the lay person. Hopefully, this short post will help you decide which Vanguard Total Market Fund will best meet your needs. If you’re not sold on the total market funds, check out the best index funds Vanguard has to offer. And, if you are still unsure about investing, take a look at our beginner’s guide to investing – it is loaded with tons of information to help you get started!
This post has been updated! As you can probably tell, there are only two funds in this post. That’s because Vanguard changed the rules for their Admiral Shares Fund – they lowered the minimum investment amount from 10K to 3k! That really helped beginner investors get in on the fund with the cheapest expense ratio. Vanguard used to have an intermediate fund with a 3K minimum investment but a higher expense ratio. This fund is being phased out with the new rules. If you want to learn more about Vanguard and the other funds that they offer, check out this post on the 10 Best Vanguard funds – you will definitely find the right fund for you on that list!
For the sake of 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).
Melanie launched Partners in Fire in 2017 to document her quest for financial independence with a mix of finance, fun, and solving the world’s problems. She’s self educated in personal finance and passionate about fighting systematic problems that prevent others from achieving their own financial goals. She also loves travel, anthropology, gaming and her cats.