Vanguard has 3 S&P 500 Index Funds. How do you Choose?

Which Vanguard S&P 500 Index Fund is the Best?

I’m a big fan of passive index investing, where you basically pile all of your investments in to index funds and don’t try to time the market. For the amateur investor, it is hard to beat the performance of this strategy. Even the pros rarely consistently beat the indexes over time. Performance aside, passive index investing is the simplest, least stressful way to actually invest your money (no, digging a hole in your back yard and dumping in stacks of cash or letting it sit in a savings account earning negligible interest are not forms of “investing”).




If you invest in index funds, it is likely that you have an S&P 500 investment in your portfolio (the S&P 500 tracks 500 of the largest companies in the U.S.). And Vanguard’s are the cheapest (lowest expense ratio), making them a preferred option.

Even Warren Buffett, quite possibly the best investor of all time, is a fan of index investing. In a Berkshire Hathaway shareholder letter, he had this to say about where he would suggest the trustee of his estate put his money when he died,

10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund (I suggest Vanguard’s).

But… wait a minute!

Vanguard (the low cost leader in index funds) actually has three index funds that all invest in the same 500 companies. What is the difference between them? A friend just happened to ask me that question recently,

Vanguard has three S&P 500 index fund investments: VOO, VFIAX, and VFINX. What is the difference, and which should I buy?




I don’t give advice on what individual investments to pick, for a number of reasons. However, education is fair game.

Here’s a quick snapshot of each of the Vanguard S&P 500 funds (performance listed is annualized trailing from 1/1/24):

VOO (Vanguard S&P 500 ETF)

  • Type of investment: Index ETF
  • Expense ratio: 0.03%
  • Minimum investment: n/a
  • Performance over last 1 year: +26.33% annualized
  • Performance over last 3 years: +9.97% annualized
  • Performance over last 5 years: +15.66% annualized
  • Performance over last 10 years: +12.00% annualized

VFINX (Vanguard 500 Index Fund, investor share class)




  • Type of investment: Index Mutual Fund
  • Expense ratio: 0.14%
  • Minimum investment: closed to new investors
  • Performance over last 1 year: +26.11% annualized
  • Performance over last 3 years: +9.85% annualized
  • Performance over last 5 years: +15.53% annualized
  • Performance over last 10 years: +11.88% annualized

VFIAX (Vanguard 500 Index Fund, admiral share class)

  • Type of investment: Index Mutual Fund
  • Expense ratio: 0.04%
  • Minimum investment: $3,000
  • Performance over last 1 year: +26.24% annualized
  • Performance over last 3 years: +9.96% annualized
  • Performance over last 5 years: +15.65% annualized
  • Performance over last 10 years: +11.99% annualized

VOO vs. VFIAX vs. VFINX: Type of Funds

The first difference you will notice is that VOO is an ETF, while VFIAX and VFINX are both index mutual funds. ETFs (short for exchange traded funds) and mutual funds differ in how they are traded and evaluated. ETF shares are traded (and evaluated) on the stock market throughout the trading day, while mutual fund share purchases/sales are executed after trading has closed for the day. Mutual fund share prices are determined by the net asset value (NAV) of all of the holdings. ETF market prices may be influenced by the NAV of the holdings, but are based on the actual buy/sell trading volume and not the value of the holdings.

This has a real-world impact on your cost. Investment brokers may charge you on the initial purchase or sale of a mutual fund (but not adding additional shares). With ETFs, you are potentially charged each time you buy or sell shares. This is a key distinction if your investment broker is anyone other than Vanguard (where you can buy/sell Vanguard ETFs and mutual funds with no purchase or selling fees).

VOO vs. VFIAX vs. VFINX: Investment Minimums

Vanguard Admiral funds have lower fees, but they also typically have a stricter requirement of maintaining a minimum total balance in that fund of at least $10,000 for most funds.

Note: VFINX has closed to new investors, and Vanguard dropped the minimum investment amount for VFIAX to $3,000 to make it more accessible to beginner investors.

VOO has no minimum investment amount.

VOO vs. VFIAX vs. VFINX: Expense Ratios

The next notable difference is in the expense ratios – what you actually pay for the management of the funds. You’ll notice VFINX has an expense ratio of 0.14% (very low by most standards), while VFIAX is less than a third of the expense ratio at 0.04%. The reason that VFIAX is lower than VFINX is that its shares are considered “Admiral” (a fancy name for preferred) shares. Vanguard has Admiral shares for many of its index funds. They are lower fee than their otherwise identical counterparts. VOO has the very slight edge on expense ratio fees (0.03% versus 0.04% for VFIAX).

VOO vs. VFIAX vs. VFINX: Performance Returns

Finally, how about performance? You’ll notice that there is virtually zero difference in performance between the three investments, over time. Below is a chart of the three over the past year. VOO overlaps VFIAX (and VFINX) and even the S&P 500 index with nearly identical performance over time (the last 5 years in the chart below).

VOO VFIAX VFINX SP500

In other words, investment performance differences between VFIAX, VFINX, and VOOO should not impact which fund you purchase.

VOO vs. VFIAX vs. VFINX: Where you Invest

Where you invest in these funds could make a difference. If you haven’t already invested in VFINX, it is not currently an option for you, as it is closed to new investors. If it is an option, VOO and VFIAX are better alternatives, due to the lower expense ratios. As for VOO vs VFIAX – if you invest outside of Vanguard at a brokerage that doesn’t have free ETF trading for VOO, then VFIAX will probably be the cheaper route over time. If you invest via Vanguard’s brokerage, VOO and VFIAX are nearly identical in appeal, if you can meet VFIAX’s $3,000 investment minimum.

There you have it.

What Vanguard S&P 500 index mutual fund or ETF do you invest in, and why?

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