VTI vs S&P 500

The Vanguard Total Stock Market Index Fund Investor Shares and the Vanguard 500 Index Fund Investor Shares are suitable as core holdings in a stock portfolio. The Vanguard Total Stock Market Index Fund provides exposure to the entire U.S. stock market, whereas the Vanguard 500 Index Fund only provides exposure to 500 of the largest U.S. companies.

 The Vanguard Total Stock Market Index Fund Investor Shares and the Vanguard 500 Index Fund Investor Shares are suitable as core holdings in a stock portfolio. The Vanguard Total Stock Market Index Fund provides exposure to the entire U.S. stock market, whereas the Vanguard 500 Index Fund only provides exposure to 500 of the largest U.S. companies.

Vanguard Total Stock Market Index Fund

The Vanguard Total Stock Market Index Fund provides diversified exposure to micro-, small-, mid- and large-cap stocks traded on the NASDAQ and New York Stock Exchange (NYSE). The mutual fund was issued on April 27, 1992, and, as of Sept. 30, 2015, it has achieved an average annual return of 9.03% since its inception. As of April 28, 2015, the fund charges an expense ratio of 0.17%, which is 84% lower than the average expense ratio of mutual funds with similar investments. A minimum investment of $3,000 is required to invest in this fund.

To provide exposure to the entire U.S. equity market, the Vanguard Total Stock Market Index Fund implements an indexing strategy and tracks the performance of the CRSP U.S. Total Market Index, its underlying index. The fund employs a representative sampling approach to approximate the entire index and its key characteristics. As of Sept. 30, 2015, the fund holds 3,809 stocks with a median market capitalization of $46.5 billion. It has a price-earnings ratio (P/E ratio) of 20.2, a price-to-book ratio (P/B ratio) of 2.5, a return on equity (ROE) of 17.4% and an earnings growth rate of 10.2%. The fund has total net assets of $371.5 billion, while the investor share class has total net assets of $95.8 billion.

As of Sept. 30, 2015, based on trailing three-year data, the Vanguard Total Stock Market Index Fund has an average annual standard deviation, or volatility, of 9.92%, an average annual return of 12.34% and a Sharpe ratio of 1.22. When measured against its best-fit index, the Russell 3000 Index Total Return USD, it has an R-squared of 99.99% and a beta of 1.

The Vanguard Total Stock Market Index Fund is best suited for moderately to highly risk-tolerant investors seeking low-cost exposure to the U.S. stock market. Additionally, the fund is suitable as a core equity holding in a diversified portfolio of assets, or it may be used as a single domestic equity fund in a portfolio.

Vanguard 500 Index Fund

Contrary to the Vanguard Total Stock Market Index Fund, the Vanguard 500 Index Fund provides exposure to a subset of the entire U.S. equity market. The Vanguard 500 Index Fund seeks to track the general price and yield performance of the Standard & Poor’s 500 Index (S&P 500 Index). Unlike the Vanguard Total Stock Market Index Fund, the Vanguard 500 Index Fund seeks to replicate its benchmark index by investing substantially all of its total net assets in the stocks comprising the index and holding each component with approximately the same weight as the index.

The fund was issued on Aug. 31, 1976; as of Sept. 30, 2015, it has generated an average annual return of 10.72% since its inception. The Vanguard 500 Index Fund has $25 billion in total net assets and holds 504 stocks with a median market capitalization of $75.8 billion. It has a P/E ratio of 19, a P/B ratio of 2.6, an earnings growth rate of 9.8% and an ROE of 18.5%.

Based on trailing three-year data, when measured against the S&P 500 Index Total Return USD, the Vanguard 500 Index Fund has an R-squared of 100%, a beta of 1 and an alpha of -0.15%. It had an average annual standard deviation of 9.74%, an average annual return of 12.23% and a Sharpe ratio of 1.23. In comparison to the Vanguard Total Stock Market Index Fund, the Vanguard 500 Index Fund experienced a slightly lower volatility and return over this period. However, the Sharpe ratios are nearly identical, which indicates that investors had similar returns on a risk-adjusted basis.

The Vanguard 500 Index Fund is suitable as a core equity holding for investors with a long-term investment horizon seeking diversified exposure within the large-cap equity market. Contrary to the Vanguard Total Stock Market Index Fund, which provides total U.S. equity market exposure, the Vanguard 500 Index Fund should be held in a diversified portfolio due to its specialized exposure.