However, you could simply start investing in VTI in the meantime and then make the switch once your account reaches $3,000. He doesn’t really care too much about individual stocks, dividend yields, P/E ratios, etc. StateOfMyHead wrote: The more I push … VTSAX is Vanguard’s Admiral share class for the total stock market. While with vtsax, after the initial investment, you can buy partial share Vtsax allows automatic contributions, while vti doesn't. 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). The Vanguard Total Stock Market Index Fund (VTSAX) basically buys you a piece of the entire U.S. stock market. The only thing I would add is understand what you are investing in so you know what you’re betting on. 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? VTSAX provides strong diversification across the total US Stock market as well as exposure to international stocks. But the dips and peaks will be much smoother along the way. The following are VTSAX strengths from our perspective: VTSAX net assets are $238.71 billion. Join Date: Jan 2016; Posts: 2936; Share Tweet #3. For most investors, the way to gain maximum diversification for minimum cost is to invest in a total stock market index fund. All you have to do is buy one share, but VTSAX requires a $3,000 minimum investment. 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. See holdings data for Vanguard Total Stock Market (VTSAX). I believe there is no right or wrong way to reach financial independence. 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 money strategy was to set it up and forget about it. This post may contain affiliate links. Lower Fee’s 1. 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. Passive investing is the idea that you should buy and hold equities rather than speculate - so VT should actually be the passive investor's fund of choice (or VTIAX+VTSAX manually rebalanced to capital weighting). Member. But putting their money into VTI gives them that diversification and more (see #5). All he really wants to know is how much money he could make from his investments after 30 years … and will he be a millionaire? Stockpile offers custodial accounts but charges $.99 per trade. VTSAX is the Vanguard Total Stock Market Index Fund Admiral Shares. VTSAX 5-year return is … If you’re looking for a hands-off, low-cost way to invest in the stock market, then investing in VTSAX is a good candidate to consider. Since, VTSMX closed to new investors, Vanguard has reduced the minimum investment amount of VTSAX to $3,000 in order to match VTSMX. Investing in the entire stock market in one of the Vanguard tools drastically reduces volatility compared to individual stocks. If I were to have started in my early to mid-20’s, then we could have been much further along towards FI. investment, market cap and category. My wife and I have built up sizeable positions in our taxable brokerage accounts by leveraging Robinhood, LOYAL3, and Stockpile to get zero or very cheap trades. This fund is a popular choice with retail and institutional investors. This is part of what diversification can get you in the stock market … lower volatility. Which strategy do you follow? In that time, we have built up positions in almost 40 different companies in both our taxable (Robinhood, Fidelity, etc.) 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. These index funds can certainly drop and will follow the overall stock market. Since they are under 18 and don’t have any earned income, we need to setup custodial accounts for them. How much do I need to invest in VTSAX? 1. 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. View & analyze the VTSAX fund chart by total assets, risk rating, Min. 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. That’s why I recommend Vanguard to anyone just starting their investment career! Cons: VTI. 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. 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. 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. 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. Your email address will not be published. For new investors (like my 3 kids), you need a minimum of $10,000 to get started which may be a bit high. The good news is that VTSAX (or the equivalent) still pays dividends … although not as much as some dividend stocks. It is always wise to diversify beyond one economy and currency. 02-20-2019, 02:10 AM. As a dividend income investor, I am a big fan of zero cost brokers like Robinhood. I could only … This fund still has a low expense ratio of 0.15% and requires a minimum investment of $3,000 to get started. For example, if you wanted to invest a certain percentage of each payment automatically, you could only do that with VTSAX. One way to ensure you are diversified is to invest in a fund that makes up the entire American Stock Market! If you haven’t been at this for a while, you might not remember the dot com … But once you accept the research that index investing is the superior evidence-based method of investing don’t stop there. These investors (myself included) are not trying to “outpick” index funds as that would be impossible. Both VTSAX and VFIAX are characterized by Vanguard as admiral funds. Expense ratios are the fees that an investment firm charges you for having your money in their Mutual Fund or ETF. A Profile of the Vanguard Total Stock Market Index Fund. If a company were to make a dividend cut … then we would immediately sell the stock. 2. VTI doesn’t let you transfer money straight from your paycheck, but my darling VTSAX does. And my wife and I will continue building our dividend portfolio. Copyright text 2020 The Money Sprout. With that said, let’s take a look at the simple investing strategies you can use. Index investing: Losers can only go down 100%, but winners can go up indefinitely. Save my name, email, and website in this browser for the next time I comment. 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. You’ve heard me mention VTSAX (Vanguard Total Stock Market Index Fund) and VBTLX (Vanguard Total Bond Marke… 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! He doesn’t really care too much about individual stocks, dividend yields, P/E ratios, etc. We use a screening process to identify which stocks to buy based on several criteria … one of which is rising dividends. Comparing VTSMX vs VTSAX 5. VTSAX, by comparison, makes the bet that future US stock market returns … Pro’s of a VTSAX Portfolio. VTSAX Overview Find basic information about the Vanguard Total Stock Market Index Fund Admiral Shares mutual fund such as total assets, risk rating, Min. Post Cancel. VTI also doesn’t let you buy fractional shares. 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. Less Volatility and Fewer Emotions -  Designed by Thrive Themes Join Date: Nov 2017; Posts: 196; Share Tweet #4. As our kids get older and start earning income and their portfolios increase, we will likely switch over to VTSMX and eventually VTSAX overtime. Only investing in a single fund like VTSAX makes your portfolio easy to manage, understand and stick with. So our kids will still learn about earning dividend income by investing in the VTI ETF, which I feel is important. 02-20-2019, 02:00 AM. Investing in VTSAX has a ton of advantages and has been a very successfully strategy for many people reaching FI. 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. This website uses cookies to ensure you get the best experience on our website. Second … we are investing for income … not necessarily portfolio value. Well, here are several reasons why our kids will be investing in VTSAX (or the equivalent) … for now – 1. MSEGX is much more concentrated than its 42 holdings would suggest as the top 10 make up over 50%. The only way investing works is if you keep doing it for a long time, no matter how bad or good things look. 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. 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. When brainstorming for this article, I really tried to deliver a comprehensive list of VTI downsides, but there aren’t many. Everything I’ve done so far in this Beating VTSAX series has focused on domestic funds because VTSAX is a domestic fund. VTSAX is a cap-weighted index fund with the top 5 holdings accounting for ~20% of its value. Well, here are several reasons why our kids will be investing in VTSAX (or the equivalent) … for now –. The point is that on average, we get a 6% raise each year just in dividend income. This makes it convenient. As I mentioned before, investing in an index fund like Vanguard’s VTSAX means passive investing. My wife and I have been building a portfolio of dividend stocks for almost 10 years now. Such an arrangement simply applies capital weighting to the entire equity market without any speculation. The only difference between VTI and VTSAX is how you buy it. 4. The index is self-cleansing; Why stock picking contests promote the wrong behavior; The stock market always go up over decades. Personally, I like to have a minimum of 10 stocks in a dividend portfolio … but preferably 20 to 30 or even more. I didn’t want to deal with cash sitting around in my account or doing math. Between all of our different accounts, we except to earn about $8,000 next year in dividend income. 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. Because many investors holding VTSAX hold either a 100% VTSAX portfolio OR VTSAX comprises their entire domestic (USA) stock allocation. Only VTSAX will allow you to add investments to your fund regularly automatically. For our children, I think the best approach for now is to invest in low cost index funds for the simplicity. I’ve simply presented the case for doing better than that. So when my kids are starting with just a couple hundred dollars each to invest … it is impossible to diversify by investing in stocks alone. 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. 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. investment, market cap and category. That’s just what VTSAX does. See Vanguard Total Stock Market (VTSAX) mutual fund ratings from all the top fund analysts in one place. Vanguard’s Total Stock Market ETF is VTI. Fortunately there is an alternative fund called (VTSMX) which are for market shares. Investing in VTSAX Makes Everything Simple Diversification Currently, the minimum amount needed to invest in VTSAX is … 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. Investing in low cost index funds that track the entire market (or the ETF equivalent) just makes everything simpler. 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. View mutual fund news, mutual fund market and mutual fund interest rates. Some have frozen dividends from time to time while many have given us raise after raise each year. One of the benefits of admiral funds is their lower management fee (expense ratio). 3. Singapore has a very bright future, and you would miss these gains by only investing … Now you get better shares in the same fund with lower fees! This minimum used to be $10,000 but recently Vanguard reduced it to $3,000. Log in. Not a great way to dip your feet into the investing world! That’s great news for the new investor because the stock market has averaged an 8.86% annual return over the past 100 years. 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. So based on the reasons I listed out above, you would think my wife and I would move all our money into VTSAX or a close equivalent … but that just isn’t going to happen right now. Comment. Post Cancel. G. Physician. So for my daughter who may have $100 to invest in birthday money … that is almost 1% fee to buy anything. Fortunately, index funds like VTSAX typically stack up well in both of these areas. VTSAX | A complete Vanguard Total Stock Market Index Fund;Admiral mutual fund overview by MarketWatch. Time, patience, and consistency will very likely reward you in the long run as you see your financial security and life options rise. orthodds. It really is a bet on the stock picking prowess of the managers. You have to buy full share of vti. Basically, this means that buying this Mutual Fund will give you exposure to the entire stock market! Low Cost Index funds versus Dividend Stocks? Investing in VTI vs. VTSAX. In our case, the investment firm is Vanguard. VTSAX is an excellent investment because it allows you to passively invest in the entire United States Economy using only one fund, which has historically risen in value and dividend payout since its inception. 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%. The strategy he suggests is optimized to grow capital, it could work if, as stated in the book, you are young or relatively young and you do the hard work on the everyday life to ensure you don't need the to cash your capital, even for a decad. Still Earning Dividends 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. It’s easy to get to know your investment and see how it reacts to current events. I know most people in the FI Community generally don’t like earning dividend income because of the tax implications. 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%. In almost 10 years, we have only sold 2 stocks because of a dividend cut. If you are young and you still have a lot of years of investing, having your savings 100% in stocks could make sense. 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. Comment. I found VTSAX simpler, so that’s what I went with. In fact, we are in the process of setting up custodial accounts for each of them now. If you decide to invest in VTSAX, you may wonder how to buy your first shares from Vanguard. 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. How to be a Millionaire by 40 – Teaching Kids to Build Wealth, Second Generation FI Rule #1 – Save 50% of Your Income. Most of the dividends we earn are “qualified dividends” anyway. Utilizing VTI will require you to add each investment manually. The only potential pitfall is that the stock market can be volatile. 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. Here’s What to Do (and Not Do) If You Win the Lottery, 27 Cheap Things to Do When You’re Bored This Weekend, VTSAX: Here's What to Know Before You Invest, How to Use the Dave Ramsey Budget Percentages, Great Lakes Student Loans: What You Need to Know. When it comes to investing for the first time in VTSAX you might be surprised to encounter a $3,000 minimum investment requirement. What are the pros of investing in VTSAX? Find our live Vanguard Total Stock Market Index Fund Admiral Shares fund basic information. 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. Simply investing in VTSAX is OK. It’s better than most investors chasing performance in actively managed funds or picking stocks. The beauty in index funds is that the dividends can be automatically reinvested for you. But for our children, there are not as many options for low cost trades. Ideally, the only thing you may need to do is rebalance your portfolio once or twice a year. Hard to go wrong with VTSAX for long term accumulation of wealth. You don’t have to do a thing. Admiral Shares generally require $10,000 as a minimum investment and Investor Shares only generally require $3,000. Once you’ve been convinced that index funds are the most efficient way to invest, the only decision you need to make is which index fund to invest in. Or VTSAX + international. Please read our disclosure for more info. Age. Teaching my children … specifically my 14 year old son … about dividend investing has been a little more difficult than I thought it would be. So moving our funds would create taxable events which we want to avoid. Choosing between VTSAX vs VTI vs VOO is hard because they are so similar, but also easy because they are so similar. Yahoo! If you do not have $3,000 to invest in the Admiral Shares (VTSAX), then you should invest in the ETF. Plenty of people invest in VTSAX only. and tax-deferred (IRA’s) accounts. 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. And despite any tax concerns, I strongly believe in building some income from dividends. What are VTSAX buy reasons? | Powered by WordPress, Why I Don’t Invest in VTSAX … But My Kids Will, minimum of 10 stocks in a dividend portfolio. 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. The Admiral share class has the lowest cost (0.04% for VTSAX), but has a minimum investment of $3,000. 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