By Dr. Leif Dahleen of Physician on Fire, WCI Network Partner

The Vanguard Total Stock Market Fund (ticker symbol VTSAX) gets a lot of attention and love from authors and investors alike. But why VTSAX? Is it the strong past performance? Maybe it’s the low fees. Do bloggers make money promoting it?

I’ll dig into what VTSAX actually is and how it’s performed while discussing what makes the “Vermont Saxophone” such a popular choice for do-it-yourself investors.

 

What Is VTSAX?

VTSAX is a mutual fund, more specifically an index fund, comprised of more than 4,000 publicly traded companies based in the United States. As index funds do, by definition, it is designed to track a benchmark. The chosen benchmark is the CRSP US Total Market Index.

It doesn’t follow the index perfectly, but stocks are added and dropped almost in parallel with the index.

The Center for Research in Security Prices (CRSP), an affiliate of the University of Chicago’s Booth School of Business, does have some inclusion and exclusion criteria to be considered “investible,” so the index (and thereby VTSAX) doesn’t actually hold every stock traded on the New York Stock Exchange (NYSE) or Nasdaq.

There are around 4,700 securities exchanged on either the NYSE or Nasdaq, and the CRSP index, as of Jan. 5, 2023, contained close to 4,000 stocks. Notably, IPOs considered are either fast-tracked and added after five days or added after 20 days.

VTSAX has been invested in Tesla since 2010. If you’ve owned the fund from then until 2022, you benefitted from the meteoric rise in the value of those initial shares because the index is cap-weighted. The stock that once trailed Steve Madden shoes, Jack in the Box, and movie theater chains in market capitalization is still one of your top 10 holdings in the fund. But remember, Tesla also lost 65% in 2022.

tesla vtsax

The same is true of Apple, Microsoft, Starbucks, and pretty much any success story you can conjure up of a small cap that grew up into a dominant large cap stock.

Of…

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