So, you are ready to start investing in Vanguard’s Total Stock Market Index Fund, VTSAX.
So, you are ready to start investing in Vanguard’s Total Stock Market Index Fund, VTSAX.

You go to Vanguard’s website to start investing.
You go to Vanguard’s website to start investing.

But then you notice this here.
But then you notice this here.

“Also available as an ETF” On no.
“Also available as an ETF” On no.

Another decision to make.
Another decision to make.

What the heck is an ETF and what do you do?
What the heck is an ETF and what do you do?

How do you know if you are making the best decision?
How do you know if you are making the best decision?

Hi, if you are new to the channel, my name is Tae from Financial Tortoise - a channel
Hi, if you are new to the channel, my name is Tae from Financial Tortoise - a channel

dedicated to helping the Sandwich Generation reach Financial Security.
dedicated to helping the Sandwich Generation reach Financial Security.

Also, if you would like a free copy of my “Sandwich Generation’s Guide to Financial
Also, if you would like a free copy of my “Sandwich Generation’s Guide to Financial

Security - 10 Steps to Securing Your Family’s Financial Future!”
Security - 10 Steps to Securing Your Family’s Financial Future!”

please go to my website financialtortoise.com and download your copy today.
please go to my website financialtortoise.com and download your copy today.

I’ll also have a link in the description below.
I’ll also have a link in the description below.

When it comes to investing in the Total Stock Market Index Fund, one of the most common
When it comes to investing in the Total Stock Market Index Fund, one of the most common

questions I get asked is - what is better.
questions I get asked is - what is better.

VTSAX or VTI?
VTSAX or VTI?

The two Vanguard’s Total Stock Market funds are some of the most popular investment funds
The two Vanguard’s Total Stock Market funds are some of the most popular investment funds

in the world and it is a question that plagues so many of us.
in the world and it is a question that plagues so many of us.

So in this video, I want to break down these two funds.
So in this video, I want to break down these two funds.

We’ll review the difference between an ETF and an Index Fund.
We’ll review the difference between an ETF and an Index Fund.

And then we’ll delve further into comparing VTSAX with VTI and I’ll give you my take
And then we’ll delve further into comparing VTSAX with VTI and I’ll give you my take

on when one might be better than the other based on your specific preference.
on when one might be better than the other based on your specific preference.

And finally, I’ll go over my personal favorite and rationale.
And finally, I’ll go over my personal favorite and rationale.

Let’s start out by getting a general understanding of ETF and Index Funds.
Let’s start out by getting a general understanding of ETF and Index Funds.

ETFs, Exchange Traded Funds are, as its name implies, funds that trade like stocks on an
ETFs, Exchange Traded Funds are, as its name implies, funds that trade like stocks on an

exchange.
exchange.

When the stock market is open, they can be bought and sold continuously throughout the
When the stock market is open, they can be bought and sold continuously throughout the

day.
day.

Because of its flexibility, they appeal to a wide range of investors and have really
Because of its flexibility, they appeal to a wide range of investors and have really

gained popularity in the last decade for both long-term investors and short term traders.
gained popularity in the last decade for both long-term investors and short term traders.

And ETFs come in all colors and sizes.
And ETFs come in all colors and sizes.

There are ETFs like VTI that follow the total stock market index.
There are ETFs like VTI that follow the total stock market index.

And there are ETFs that follow foreign markets, bonds and commodities.
And there are ETFs that follow foreign markets, bonds and commodities.

Index funds on the other hand are passively managed mutual funds that track an index.
Index funds on the other hand are passively managed mutual funds that track an index.

Index like S&P 500, total stock market and many other securities.
Index like S&P 500, total stock market and many other securities.

Because they are passively managed, they often have lower costs compared to actively managed
Because they are passively managed, they often have lower costs compared to actively managed

funds.
funds.

Now, what are the key differences between an ETF and an Index Fund?
Now, what are the key differences between an ETF and an Index Fund?

Let me review 5 of them.
Let me review 5 of them.

First is the timing of Share Price.
First is the timing of Share Price.

There is a fundamental difference between how an ETF and an index fund is traded in
There is a fundamental difference between how an ETF and an index fund is traded in

the market.
the market.

ETFs as I mentioned earlier trade like ordinary stocks on an exchange.
ETFs as I mentioned earlier trade like ordinary stocks on an exchange.

It can be bought and sold throughout the day for a specific price at that specific time.
It can be bought and sold throughout the day for a specific price at that specific time.

This means, the price of ETFs can fluctuate up and down throughout a single day when the
This means, the price of ETFs can fluctuate up and down throughout a single day when the

market is open.
market is open.

Index funds on the other hand don't have this ability.
Index funds on the other hand don't have this ability.

Yes.
Yes.

You can put an order to purchase an index fund at 10 in the morning, but the price to
You can put an order to purchase an index fund at 10 in the morning, but the price to

which you will purchase that index fund won’t be set until the close of the market that
which you will purchase that index fund won’t be set until the close of the market that

day.
day.

You could have put in an order looking at the price in the morning, but if the market
You could have put in an order looking at the price in the morning, but if the market

moved drastically throughout the day, you might be surprised to find that the amount
moved drastically throughout the day, you might be surprised to find that the amount

which you paid for that fund is different from what you saw when you submitted your
which you paid for that fund is different from what you saw when you submitted your

buy order.
buy order.

For index funds, the fund company prices the fund, the net asset value (NAV), only once
For index funds, the fund company prices the fund, the net asset value (NAV), only once

a day based on the value of the securities owned by the fund.
a day based on the value of the securities owned by the fund.

In essence, you are buying ETFs in real time while for an Index fund, you don’t know
In essence, you are buying ETFs in real time while for an Index fund, you don’t know

the actual price of that fund until later in the evening and even sometimes the following
the actual price of that fund until later in the evening and even sometimes the following

day.
day.

From this lens, ETFs are quite attractive to investors who want to trade throughout
From this lens, ETFs are quite attractive to investors who want to trade throughout

the day and know the exact price of their trade.
the day and know the exact price of their trade.

A second difference between ETFs and Index funds is what is known as “Fractional Shares.”
A second difference between ETFs and Index funds is what is known as “Fractional Shares.”

Or more specifically if you can purchase the fund in fractional shares.
Or more specifically if you can purchase the fund in fractional shares.

It sounds fancy, but if you know basic algebra you get the concept.
It sounds fancy, but if you know basic algebra you get the concept.

It means just what it sounds like.
It means just what it sounds like.

When you have the ability to purchase a fund as fractional shares, you have the ability
When you have the ability to purchase a fund as fractional shares, you have the ability

to buy a “fraction” of the share.
to buy a “fraction” of the share.

You aren’t locked into needing to buy the whole share.
You aren’t locked into needing to buy the whole share.

For example, let’s say VTSAX is trading at $100 per share today.
For example, let’s say VTSAX is trading at $100 per share today.

You might only have $50 to invest, so you can just buy a “fraction” of that $100
You might only have $50 to invest, so you can just buy a “fraction” of that $100

/ share.
/ share.

Essentially half a share with that $50.
Essentially half a share with that $50.

Now, VTSAX, the index fund, allows you to purchase the fund as fractional shares.
Now, VTSAX, the index fund, allows you to purchase the fund as fractional shares.

However, VTI, the ETF equivalent, does not.
However, VTI, the ETF equivalent, does not.

With VTSAX, it doesn’t matter how much you have, you can invest that full amount into
With VTSAX, it doesn’t matter how much you have, you can invest that full amount into

the fund regardless if the money you have is a $1 or a $1,000.
the fund regardless if the money you have is a $1 or a $1,000.

VTI on the other hand, because it does not allow fractional shares, you in essence might
VTI on the other hand, because it does not allow fractional shares, you in essence might

have money left over or not be able to afford the share that day.
have money left over or not be able to afford the share that day.

Almost like needing exact change at the grocery register.
Almost like needing exact change at the grocery register.

One thing I want to call out is that this is Vanguard specific.
One thing I want to call out is that this is Vanguard specific.

Other firms, like Fidelity, allow for fractional shares for its ETFs.
Other firms, like Fidelity, allow for fractional shares for its ETFs.

We will need to wait and see if this trend will be more widely implemented across all
We will need to wait and see if this trend will be more widely implemented across all

investment firms.
investment firms.

But for now, if you are invested in Vanguard like me, just know that you can’t make fractional
But for now, if you are invested in Vanguard like me, just know that you can’t make fractional

share purchases with VTI.
share purchases with VTI.

And this segways nicely into the number three difference.
And this segways nicely into the number three difference.

Automatic investing.
Automatic investing.

You can't make automatic investments or withdrawals into or out of ETFs.
You can't make automatic investments or withdrawals into or out of ETFs.

This makes sense given you can’t do fractional share purchases of VTI.
This makes sense given you can’t do fractional share purchases of VTI.

You’ll need exact change each time so you’ll need to manually make purchases.
You’ll need exact change each time so you’ll need to manually make purchases.

For index funds on the other hand, you can set up automatic investments and withdrawals
For index funds on the other hand, you can set up automatic investments and withdrawals

into and out of any of Vanguard’s mutual funds based on your preferences.
into and out of any of Vanguard’s mutual funds based on your preferences.

If you are an investor who likes the idea of setting it and forget it, Index Fund like
If you are an investor who likes the idea of setting it and forget it, Index Fund like

VTSAX may feel attractive here.
VTSAX may feel attractive here.

The Fourth difference is their minimum investment requirements.
The Fourth difference is their minimum investment requirements.

In this category, ETF like VTI wins.
In this category, ETF like VTI wins.

Because they are traded like stocks, there is no minimum investment.
Because they are traded like stocks, there is no minimum investment.

You just need enough to purchase a single share.
You just need enough to purchase a single share.

Index funds, on the other hand, have a minimum.
Index funds, on the other hand, have a minimum.

In the case of VTSAX, $3,000.
In the case of VTSAX, $3,000.

So for investors who don’t have $3,000 to invest, VTI has a lower barrier to entry.
So for investors who don’t have $3,000 to invest, VTI has a lower barrier to entry.

Cost is the fifth difference.
Cost is the fifth difference.

And this is where an ETF like VTI has an another edge.
And this is where an ETF like VTI has an another edge.

Though both VTI and VTSAX are essentially tracking the same index, VTI has an expense
Though both VTI and VTSAX are essentially tracking the same index, VTI has an expense

ratio of 0.03% vs. VTSAX’s 0.04%.
ratio of 0.03% vs. VTSAX’s 0.04%.

I mean 0.04% is pretty low compared to the industry, but 0.03% is pretty amazing.
I mean 0.04% is pretty low compared to the industry, but 0.03% is pretty amazing.

Now that we’ve covered five key differences between VTSAX and VTI, let me go over which
Now that we’ve covered five key differences between VTSAX and VTI, let me go over which

one might be better for you based on your investing priorities.
one might be better for you based on your investing priorities.

If you are the type that is worried about price and you want to have full control over
If you are the type that is worried about price and you want to have full control over

the specific price of the share when you buy, VTI is likely your best choice.
the specific price of the share when you buy, VTI is likely your best choice.

As mentioned earlier, ETFs allow you to buy shares at a specific price throughout the
As mentioned earlier, ETFs allow you to buy shares at a specific price throughout the

day.
day.

If the market is quite volatile in a single day, this could have a huge impact on your
If the market is quite volatile in a single day, this could have a huge impact on your

investment.
investment.

With an index fund like VTSAX, you technically don’t know the final price until the market
With an index fund like VTSAX, you technically don’t know the final price until the market

has closed and the investment firm has calculated the final net asset value of that fund.
has closed and the investment firm has calculated the final net asset value of that fund.

Ofcourse, you should realize that trying to time the market could be a dangerous endeavor.
Ofcourse, you should realize that trying to time the market could be a dangerous endeavor.

If you are looking to buy and sell ETFs throughout the day, you would be considered more of a
If you are looking to buy and sell ETFs throughout the day, you would be considered more of a

trader than an investor.
trader than an investor.

As the old saying goes - it's not about timing the market, but time in the market.
As the old saying goes - it's not about timing the market, but time in the market.

But again, if you are the type that likes full control over the price, VTI is your kind
But again, if you are the type that likes full control over the price, VTI is your kind

of investment.
of investment.

If you are the type that prefers automation and likes to take a set it and forget it approach,
If you are the type that prefers automation and likes to take a set it and forget it approach,

VTSAX is likely your best choice.
VTSAX is likely your best choice.

As I mentioned earlier regarding fractional shares, index funds allow fractional shares
As I mentioned earlier regarding fractional shares, index funds allow fractional shares

while ETFs do not.
while ETFs do not.

This also means you can set up automated investments with Index Funds while with ETFs you cannot.
This also means you can set up automated investments with Index Funds while with ETFs you cannot.

With ETFs like VTI you have to buy a full share each time.
With ETFs like VTI you have to buy a full share each time.

And you can’t automate this.
And you can’t automate this.

Whenever you want to purchase VTI, you have to login to your account and with exact change,
Whenever you want to purchase VTI, you have to login to your account and with exact change,

you purchase a share of VTI based on the price that it is trading at that specific time.
you purchase a share of VTI based on the price that it is trading at that specific time.

Personally, I love automation.
Personally, I love automation.

James Clear, the author of Atomic Habits hammers this idea of systems.
James Clear, the author of Atomic Habits hammers this idea of systems.

He says the key to reaching our goals is about having a system, a process that leads us to
He says the key to reaching our goals is about having a system, a process that leads us to

that result.
that result.

Most people I believe will produce better results with automatic investments.
Most people I believe will produce better results with automatic investments.

You aren’t trying to time the market or rely on your will to make a trade that day.
You aren’t trying to time the market or rely on your will to make a trade that day.

This is all happening behind the scenes and I believe this will produce better results
This is all happening behind the scenes and I believe this will produce better results

in the long run.
in the long run.

So if you want to automate your investment as much as possible, VTSAX is your kind of
So if you want to automate your investment as much as possible, VTSAX is your kind of

investment.
investment.

If you are worried about minimum investment requirements, because you have a limited amount
If you are worried about minimum investment requirements, because you have a limited amount

of money to invest, VTI is likely your best choice.
of money to invest, VTI is likely your best choice.

As I mentioned earlier, VTSAX has a minimum requirement of $3,000 while VTI has no minimum
As I mentioned earlier, VTSAX has a minimum requirement of $3,000 while VTI has no minimum

requirement.
requirement.

Just the cost of the share.
Just the cost of the share.

If you are just getting started and don’t have the $3,000 to invest, go with a VTI.
If you are just getting started and don’t have the $3,000 to invest, go with a VTI.

You want to get into the market as soon as possible so don’t let the lack of minimum
You want to get into the market as soon as possible so don’t let the lack of minimum

requirement be a barrier.
requirement be a barrier.

At the time of this video, VTI is trading for approximately $240.
At the time of this video, VTI is trading for approximately $240.

Get your $240 and start investing right away.
Get your $240 and start investing right away.

Alright, there’s a lot that I just covered so thank you for staying with me so far.
Alright, there’s a lot that I just covered so thank you for staying with me so far.

Let me share with you what I personally invest in.
Let me share with you what I personally invest in.

My goto equities investment is VTSAX.
My goto equities investment is VTSAX.

While some people prefer VTI over VTSAX because of the reasons I mentioned earlier in this
While some people prefer VTI over VTSAX because of the reasons I mentioned earlier in this

video; share price, minimum and expense ratio.
video; share price, minimum and expense ratio.

Though these are very important and valid reasons, I personally prefer VTSAX primarily
Though these are very important and valid reasons, I personally prefer VTSAX primarily

because it saves me time.
because it saves me time.

I like the idea of automating my buy order so that the trade is executed regularly, every
I like the idea of automating my buy order so that the trade is executed regularly, every

month without me even realizing that it’s happening, whether I’m working or on a vacation
month without me even realizing that it’s happening, whether I’m working or on a vacation

trip with my family.
trip with my family.

Compared tha to having to find time on Monday while the market is open to put in a buy order,
Compared tha to having to find time on Monday while the market is open to put in a buy order,

calculate how many shares I can buy based on the share price, watch it to make sure
calculate how many shares I can buy based on the share price, watch it to make sure

the order executes and get annoyed by the fact that there are few dollars left over
the order executes and get annoyed by the fact that there are few dollars left over

that can’t be invested.
that can’t be invested.

Yes, does VTI allow for specific share prices?
Yes, does VTI allow for specific share prices?

Does it have a lower expense ratio?
Does it have a lower expense ratio?

Does it allow me to get into with less than $3,000?
Does it allow me to get into with less than $3,000?

Of course.
Of course.

But for me, I prefer to spend the extra time making more money to invest in the market
But for me, I prefer to spend the extra time making more money to invest in the market

and with my family.
and with my family.

Thank you guys for watching.
Thank you guys for watching.

Please let me know in the comments below your preference between VTSAX and VTI.
Please let me know in the comments below your preference between VTSAX and VTI.

There is no wrong answer, just an answer that best works for your situation.
There is no wrong answer, just an answer that best works for your situation.

I’d love to hear if there are decision factors that I missed or ones that really resonated
I’d love to hear if there are decision factors that I missed or ones that really resonated

with you.
with you.

Thank you guys for watching.
Thank you guys for watching.

If you found value from this video, please hit the like button, leave a comment and subscribe
If you found value from this video, please hit the like button, leave a comment and subscribe

to the channel so that you don't miss out on any of my other upcoming videos.
to the channel so that you don't miss out on any of my other upcoming videos.

I firmly believe that being part of the Sandwich Generation doesn't have to mean financial
I firmly believe that being part of the Sandwich Generation doesn't have to mean financial

stress.
stress.

With careful planning and preparation, we can thrive during this stage of life.
With careful planning and preparation, we can thrive during this stage of life.

Help me spread the knowledge.
Help me spread the knowledge.

Thank you again and I'll see you in my next video.
Thank you again and I'll see you in my next video.