Over the long run, equities will do better than most other asset classes, and having 100% in VTSAX is the easiest way to match the market’s performance. My money strategy was to set it up and forget about it. When it comes to investing for the first time in VTSAX you might be surprised to encounter a $3,000 minimum investment requirement. 5. The only way investing works is if you keep doing it for a long time, no matter how bad or good things look. On the other hand, there are plenty of successful investors who are reaching FI and living off the dividend income they are earning every year. Comment. For new investors (like my 3 kids), you need a minimum of $10,000 to get started which may be a bit high. I didn’t want to deal with cash sitting around in my account or doing math. The only potential pitfall is that the stock market can be volatile. sounds like you may have jumped the gun by opening and investing in taxable without seeing if you have enough cash to max out retirement accounts. Please read our disclosure for more info. He doesn’t really care too much about individual stocks, dividend yields, P/E ratios, etc. Investing in VTSAX Makes Everything Simple Teaching my children … specifically my 14 year old son … about dividend investing has been a little more difficult than I thought it would be. Such an arrangement simply applies capital weighting to the entire equity market without any speculation. 1. The Admiral share class has the lowest cost (0.04% for VTSAX), but has a minimum investment of $3,000. Some have frozen dividends from time to time while many have given us raise after raise each year. As our kids get older and start earning income and their portfolios increase, we will likely switch over to VTSMX and eventually VTSAX overtime. Post Cancel. If you do not have $3,000 to invest in the Admiral Shares (VTSAX), then you should invest in the ETF. Opening up Vanguard custodial accounts for them and investing in VTSAX, VTSMX, or VTI comes at a very low cost … compared to the amount of funds they will be investing. 1. Fortunately, index funds like VTSAX typically stack up well in both of these areas. 2. In that time, we have built up positions in almost 40 different companies in both our taxable (Robinhood, Fidelity, etc.) Still Earning Dividends Since we can’t go back in time and start again, my wife and I are doing the next best thing … teaching our kids (ages 14, 10, and 6) about the value of investing early on. Cons: VTI. Expense ratios are the fees that an investment firm charges you for having your money in their Mutual Fund or ETF. Fortunately there is an alternative fund called (VTSMX) which are for market shares. A good amount of our portfolio is held in taxable accounts, with almost every stock we own more valuable then when we made our first purchase. VTSAX Overview Find basic information about the Vanguard Total Stock Market Index Fund Admiral Shares mutual fund such as total assets, risk rating, Min. VTSAX is a cap-weighted index fund with the top 5 holdings accounting for ~20% of its value. VTI also doesn’t let you buy fractional shares. Utilizing VTI will require you to add each investment manually. If you decide to invest in VTSAX, you may wonder how to buy your first shares from Vanguard. Well, here are several reasons why our kids will be investing in VTSAX (or the equivalent) … for now –. He doesn’t really care too much about individual stocks, dividend yields, P/E ratios, etc. 02-20-2019, 02:00 AM. The beauty in index funds is that the dividends can be automatically reinvested for you. Second … we are investing for income … not necessarily portfolio value. See holdings data for Vanguard Total Stock Market (VTSAX). I know most people in the FI Community generally don’t like earning dividend income because of the tax implications. Basically, it takes all the emotions out of investing … which I think is great for young investors who are learning the ropes for the first time. Choosing between VTSAX vs VTI vs VOO is hard because they are so similar, but also easy because they are so similar. Admiral Shares generally require $10,000 as a minimum investment and Investor Shares only generally require $3,000. Member. Only VTSAX will allow you to add investments to your fund regularly automatically. and tax-deferred (IRA’s) accounts. That’s great news for the new investor because the stock market has averaged an 8.86% annual return over the past 100 years. And while investing in dividend stocks has been great … the only regret I have is not starting sooner as we started building our income stream while I was in my mid-30’s. The downside is Vanguard admiral funds have a minimum investment threshold. And here are the recent historical returns of the S&P 500 and Total Stock Market index, as of January 4, 2019:[Data: Morningstar]The correlation in returns between the S&P 500 and the Total Stock Market Index is very, very high. Currently, the minimum amount needed to invest in VTSAX is … Since, VTSMX closed to new investors, Vanguard has reduced the minimum investment amount of VTSAX to $3,000 in order to match VTSMX. In almost 10 years, we have only sold 2 stocks because of a dividend cut. You don’t have to do a thing. While this income will not fully fund our retirement or allow us to reach Financial Independence (FI) … it will certainly go a very long way in helping out. Personally, I like to have a minimum of 10 stocks in a dividend portfolio … but preferably 20 to 30 or even more. Using this correlation calculator by BuyUpside, the correlation between VTI (Vanguard’s Total Stock Market ETF), and VOO (Vanguard’s S&P 500 ETF) is 99.96%. In our case, the investment firm is Vanguard. The good news is that VTSAX (or the equivalent) still pays dividends … although not as much as some dividend stocks. Singapore has a very bright future, and you would miss these gains by only investing … So you may be wondering why someone who strongly believes in investing in dividend stocks (as opposed to index funds) would recommend index funds instead? Investing in low cost index funds that track the entire market (or the ETF equivalent) just makes everything simpler. But the dips and peaks will be much smoother along the way. All he really wants to know is how much money he could make from his investments … It’s fun (for investing nerds) to see everything they have to offer, but at the end of the day, keeping it simple is usually the best option… VTSAX vs VTI vs VOO: Why Simple is Better. Not a great way to dip your feet into the investing world! Everything I’ve done so far in this Beating VTSAX series has focused on domestic funds because VTSAX is a domestic fund. Only investing in a single fund like VTSAX makes your portfolio easy to manage, understand and stick with. For our children, I think the best approach for now is to invest in low cost index funds for the simplicity. Because many investors holding VTSAX hold either a 100% VTSAX portfolio OR VTSAX comprises their entire domestic (USA) stock allocation. So instead of worrying and stressing about how to teach him about investing … for now we are just sticking with what is easy – VTSAX … or for him the VTI ETF equivalent. If you’re thinking of investing and have the money to start you probably ought to start as soon as possible even if you’re only buying index funds. Which strategy do you follow? Both VTSAX and VFIAX lack international exposure, but Vanguard offers VGTSX, which is their Vanguard Total International Stock Index Fund! It offers diversification across thousands of companies and has an extremely low expense ratio of 0.04% for admiral shares. If you are just starting out … it is very difficult to build a diversified portfolio … which is especially important when you are buying dividend stocks. Please make sure that you are able to afford to max out retirement accounts and that money is automatically taken out of your paycheck until the end of the year. Now you get better shares in the same fund with lower fees! It’s easy to get to know your investment and see how it reacts to current events. For example, if you wanted to invest a certain percentage of each payment automatically, you could only do that with VTSAX. Diversification StateOfMyHead wrote: The more I push … VTSAX is Vanguard’s Admiral share class for the total stock market. When brainstorming for this article, I really tried to deliver a comprehensive list of VTI downsides, but there aren’t many. All you have to do is buy one share, but VTSAX requires a $3,000 minimum investment. Ideally, the only thing you may need to do is rebalance your portfolio once or twice a year. Well, here are several reasons why our kids will be investing in VTSAX (or the equivalent) … for now – 1. You’ve heard me mention VTSAX (Vanguard Total Stock Market Index Fund) and VBTLX (Vanguard Total Bond Marke… One of the benefits of admiral funds is their lower management fee (expense ratio). Most of the dividends we earn are “qualified dividends” anyway. I’ve simply presented the case for doing better than that. Based on using the Rule of 72, we can estimate that our total annual dividend income will reach $16,000 after 8 additional years and $32,000 after 16 years! Investing in the entire stock market in one of the Vanguard tools drastically reduces volatility compared to individual stocks. It really is a bet on the stock picking prowess of the managers. Personally, I don’t hold that same point of view and don’t worry too much about how much dividend income we are earning each year. VTSAX 3-year return is 13.45%, which is in line with the 3-year return of the benchmark index (CRSP US Total Market TR USD), 13.46%. Research information including asset allocation, sector weightings and top holdings for Vanguard Total Stock Market. This is due to VTSAX being a mutual fund and the associated costs per investor that come with the management of such. Your email address will not be published. Basically, this means that buying this Mutual Fund will give you exposure to the entire stock market! This post may contain affiliate links. My portfolio isn’t outperforming the Vanguard VTSAX Total Market Stock Index but it’s costing me nearly $20,000 a year in expense ratio fees versus $2,000 a year had I followed Mr. Collins’ advice and had my portfolio solely in VTSAX. These index funds can certainly drop and will follow the overall stock market. investment, market cap and category. orthodds. 4. While with vtsax, after the initial investment, you can buy partial share Vtsax allows automatic contributions, while vti doesn't. What are VTSAX buy reasons? Learn about the fund's agencies rating and risk rating, transparent information about the fund's management personal, policies of invested allocation and diversification, past performance. Comparing VTSMX vs VTSAX The Vanguard Total Stock Market Index Fund (VTSAX) basically buys you a piece of the entire U.S. stock market. Join Date: Jan 2016; Posts: 2936; Share Tweet #3. Simply investing in VTSAX is OK. It’s better than most investors chasing performance in actively managed funds or picking stocks. We use a screening process to identify which stocks to buy based on several criteria … one of which is rising dividends. It is always wise to diversify beyond one economy and currency. Plenty of people invest in VTSAX only. I don’t want my 14 year old son to get discouraged after buying a stock and watching it drop by 5% (or more) in a week. This is part of what diversification can get you in the stock market … lower volatility. In fact, we are in the process of setting up custodial accounts for each of them now. Lower Fee’s With that said, let’s take a look at the simple investing strategies you can use. I found VTSAX simpler, so that’s what I went with. Join Date: Nov 2017; Posts: 196; Share Tweet #4. Anyone who has spent anytime around the FI community has probably heard of someone praising VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) as the best tool for investing in the stock market. The point is that on average, we get a 6% raise each year just in dividend income. However, you could simply start investing in VTI in the meantime and then make the switch once your account reaches $3,000. VTSAX is the Vanguard Total Stock Market Index Fund Admiral Shares. This still doesn’t help my kids out too much … which is why we will be investing in the Vanguard equivalent ETF called Vanguard Total Stock Market ETF (VTI). Investing in VTSAX Makes Everything Simple This fund is a popular choice with retail and institutional investors. But instead of sending them down the path of dividend investing, we are switching gears a little and having them invest in low cost index funds. So our kids will still learn about earning dividend income by investing in the VTI ETF, which I feel is important. Find our live Vanguard Total Stock Market Index Fund Admiral Shares fund basic information. Copyright text 2020 The Money Sprout. So moving our funds would create taxable events which we want to avoid. A Profile of the Vanguard Total Stock Market Index Fund. To be honest, if I hadn’t spent years learning about dividend stocks and building our portfolio … I probably would have went the simple route and invested everything into VTSAX or an equivalent. My wife and I have been building a portfolio of dividend stocks for almost 10 years now. Investing in VTI vs. VTSAX. The market will go up and down, and if you are panicking every time it goes down, these simple investing strategies will not work for you. The index is self-cleansing; Why stock picking contests promote the wrong behavior; The stock market always go up over decades. What's better than a free investment in your future?Download the free "6 Simple Steps to Financial Security" cheat sheet when you subscribe to our newsletter.It's time to start feeling confident about money. But putting their money into VTI gives them that diversification and more (see #5). This minimum used to be $10,000 but recently Vanguard reduced it to $3,000. Less Volatility and Fewer Emotions That’s just what VTSAX does. You have to buy full share of vti. I could only … Between all of our different accounts, we except to earn about $8,000 next year in dividend income. View & analyze the VTSAX fund chart by total assets, risk rating, Min. G. Physician. This fund still has a low expense ratio of 0.15% and requires a minimum investment of $3,000 to get started. Sign up below and join others who've taken the first steps to grow their income, save more of their hard earned cash, and grown their net worth. 02-20-2019, 02:10 AM. The following are VTSAX strengths from our perspective: VTSAX net assets are $238.71 billion. How to be a Millionaire by 40 – Teaching Kids to Build Wealth, Second Generation FI Rule #1 – Save 50% of Your Income. What are the pros of investing in VTSAX? Vanguard’s Total Stock Market ETF is VTI. VTSAX provides strong diversification across the total US Stock market as well as exposure to international stocks. Save my name, email, and website in this browser for the next time I comment. Or VTSAX + international. Investing in VTSAX has a ton of advantages and has been a very successfully strategy for many people reaching FI. The reason why I created this Vanguard 101 course is because Vanguard is known for having the lowest expense ratios on the market for all of their funds. If I were to have started in my early to mid-20’s, then we could have been much further along towards FI. If a company were to make a dividend cut … then we would immediately sell the stock. 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