• Kale

FIRE: Better index than the VTSAX?

Making sure we are all investing in the right index fund.


Everyone who has ever picked up a personal finance/financial independence book has heard that "individual investors should not attempt to stock pick (beat the market) and should instead simply buy the entire market".

This concept is the brainchild of Jack Bogle and has proven, for the most part, correct over the last 30 years,


For those unaware, Jack Bogle started Vanguard & created the first index fund. Vanguard is that investment firm that offers the FIRE staple - Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).


In theory, the VTSAX is the only equity investment the FIRE community members should make before/after/during "retire-early".


This is best accomplished by automatic transfers into your brokerage account and continued purchasing/reinvesting into the index fund.


This all leads us to the big question - is the VTSAX truly the best choice?


Many new funds have been created during the last 10 years that are incredibly similar in structure. I will use the following data points to determine our winner of the reviewed alternative funds: performance over the last 1, 5, and 10 year periods, fees/costs, minimum balance requirements.


Here are the competitors:

  1. VTSAX* (the OG)

  2. Schwab Total Market Index Fund (SWTSX)

  3. Fidelity Zero Total Market Index Fund (FZROX)



VTSAX


Reference Page


YTD Performance: -3.40%

5 YR: 10.02%

10 YR: 13.73%


Fees/Expense Ratio: 0.04%


Minimum Investment Requirements: $3,000


SWTSX


Reference Page


YTD Performance: -3.54%

5 YR: 9.95%

10 YR: 13.65%


Fees/Expense Ratio: 0.03%


Minimum Investment Requirements: $0.00


FZROX


Reference Page


YTD Performance: -3.62%

5 YR: NA (started in 2018)

10 YR: NA (started in 2018)


Fees/Expense Ratio: 0.00%


Minimum Investment Requirements: $0.00



Results


This isn't rocket science folks.


It appears based on this high-level review that the VTSAX is the superior index choice IF you have a minimum of $3,000 to invest.


The Vanguard alternative if you do not have the $3,000 is the VTI ETF. This performs just about as well as the other 2 funds above.


Time will tell if the Fidelity Zero expense index proves to be a great new option, but early YTD data still showing it underperforming VTSAX even after expenses are deducted.


For now, stick with VTSAX or VTI.

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