SWTSX vs. VTSAX: Which Total Market Index Fund Is Better?

Investing in a total market index fund not only provides you with a great opportunity to generate passive income. By taking advantage of this financial tool, you are also taking advantage of a great and inexpensive way to diversify your portfolio.

In this guide, we’ll look at two different Total Market Index Funds you might want to consider investing in. We’ll be seeing what they both bring to the table, and we’ll be comparing them to each other so that you can make an informed decision on which is right for you.

It’s time to look at how SWTSX vs. VTSAX compares!

What Do SWTSX And VTSAX Track?

When looking at what you’re investing in, it’s a great idea to look into what they both track. In this case, the SWTSX tracks the Dow Jones U.S. Total Stock Market Index while VTSAX tracks the CRSP U.S. Total Market Index, developed at the University of Chicago’s Booth School of Business. So what exactly are these two indexes? Let’s take a look.

What exactly is the Dow Jones U.S. Total Stock Market Index?

Let’s start with the underlying one of SWTSX. This is the Dow Jones U.S. Total Stock Market Index. We’ve already covered this in a past article, so you know it’s well known. This index is a market-cap-weighted index that looks to provide broad-based coverage of the U.S. stock market. It thus represents the top 95% of the U.S. stock market.

The fact that it’s a total stock market index means that large and mid, and small-cap stocks are included in the index. Only the smallest and least liquid companies are excluded from the exchange and thus not represented. Added up, the index includes 4090 different constituents. This is more than enough to cover nearly all the companies listed.

What exactly is the CRSP U.S. Total Market Index?

Now that we’ve looked at the Dow Jones let’s look at what is behind VTSAX. This is a fund designed by the Center for Research in Security Prices or CRSP. In this case, the fund tracks the CRSP U.S. Total Market Index.

This is also a total market index of more than 4,000 stocks. This includes the likes of micro- to small and blue-chip giant stocks. Thus it shows how the entire market is doing.

It has to its disadvantage because it’s a little less known index around there. But why is this? This is because it was built at the request of Vanguard. It has thus then been used to track the U.S. markets very successfully and has provided great returns for those investing in the same.

What Is SWTSX?

Now that we’ve covered the underlying indexes, we need to look at the funds.

Let’s start with the SWTSX. The Schwab Total Stock Market Index Fund or SWTSX was developed by Charles Schwab Investment Management, Inc built-in 1999. This fund looks to give investors exposure to the entirety of the U.S. market by tracking the Dow Jones.

They do so by investing at least 80% of their net assets into the stocks represented in the index. However, this percentage does tend to be higher than that base percentage mentioned.

So how much is being invested? At the time of writing, the same has a total of $18 billion in net assets. This shows that it’s a very popular investment product and deserves its market position.

Who Manages SWTSX?

So we’ve given you a brief overview of what SWTSX is, but that overview is not complete. We still need to show you who manages the same and what is represented. So who is the Charles Schwab Corporation? This is the investment firm founded by its namesake in 1971. Shortly after, the firm was already at the forefront of its sector, providing discount brokerage services.

The firm has been at the forefront of commission-free stock and ETF trading. Since then, they have become one of the leading financial services firms. They provide investment and financial tools for different investors and traders. They can serve all of these by providing various platforms that can satisfy any investor’s needs.

With over 30 years of experience in investment management, the firm grew to become the third-largest provider of index mutual funds. They have over $380 billion in index mutual fund and ETF assets under management.

What Does SWTSX Hold?

Now that we know who is behind this great investment tool let’s look at what you’re investing in. Of the 3421 holdings, the top ten in terms of weight are:

Microsoft Corp: 5.17%	Apple Inc: 4.88%
Amazon.com Inc: 3.05%	Tesla Inc: 1.88%
Alphabet Inc. Class A: 1.85%	Alphabet Inc. Class C: 1.73%
Meta Platforms Inc: 1.60%	NVIDIA Corp: 1.32%
Berkshire Hathaway Inc. Class B: 1.10%	JPMorgan Chase & Co: 1.05%

These 10 holdings make for 22.99% of the fund’s total portfolio. Now, the whole portfolio distributes itself in terms of sectors thus:

Technology: 28.02%	Financials: 16.65%
Consumer Services: 13.16%	Industrials: 11.65%
Health Care: 11.49%	Consumer Goods: 8.18%
Oil & Gas: 2.93%	Utilities: 2.27%
Basic Materials: 2.00%	Non-Classified Equity: 1.56%

Here we can see the usual suspects. Nowadays, the ‘FAANG’ stocks are ever-present and dominant in the world of large-cap and even total market index funds. The fact is that they do deserve their representation in these. They are such a large part of the U.S. markets, which make anything that represents the same as many of them.

What is the VTSAX?

What is the second fund we’re reviewing in our SWTSX vs. VTSAX article? The Vanguard Total Stock Market Index Fund is a total index fund created in 1992. The official summary is designed to provide investors with exposure to the entire U.S. equity market. This includes small-, mid-, and large-cap growth and value stocks.

According to Morningstar Inc, VTSAX now accounts for 10% of all assets in U.S. stock mutual funds and ETFs in the market. The fund has a whopping $1.3 trillion in net assets. This means that it has a massive influence on the same and is something that you really should consider.

Who Manages VTSAX?

We’ve already covered a different Vanguard product here at Turbowallet. If you’re wondering what that product is, check out our QQQ vs. VTI article.

The Vanguard Group is one of the most important investment firms out there today. They provide a selection of low-cost mutual funds, ETFs, advice, and other services. They provide investment services for both individuals, financial professionals, and even institutional investors.

One thing that sets Vanguard apart and lets it set such low fees is its structure. Given that the firm is owned by its funds, it can reduce the fees and expense ratios.

The company was founded in 1975 by John C. Bogle as a division of the Wellington Management Company. The venture began with a fund that tracked the S&P 500. Nowadays, you can invest in the same under the name of the Vanguard 500 Index Fund.

Bogle has since retired from Vanguard; however, the group is still the largest issuer of mutual funds globally and the second-largest issuer of ETFs. As of 2021, the firm has more than $7.50 trillion in assets under management, second only to BlackRock, Inc. This shows that the firm is well known and accepted in investing.

Vanguard is proud to say that Over the last 10 years, they have had a history of strong performance.

What Does VTSAX Hold?

Now we know what the VTSAX is and what it tracks, let’s look at what the fund holds. The entirety of the fund holds a total of 4093 different company stocks. Of these, the top 10 are:

Microsoft Corp: 5.30%	Apple Inc: 5.00%
Alphabet Inc: 3.60%	Amazon.com Inc: 3.10%
Tesla Inc: 1.90%	Meta Platforms Inc: 1.60%
NVIDIA Corp: 1.30%	Berkshire Hathaway Inc: 1.10%
JPMorgan Chase & Co: 1.10%	UnitedHealth Group Inc: 0.90%

These 10 stocks come up with 24.90% of the total net assets. When addressing the sector distributions, these translate to:

Technology: 28.20%	Consumer Discretionary: 16.30%
Industrials: 13.00%	Health Care: 12.80%
Financials: 11.60%	Consumer Staples: 4.40%
Real Estate: 3.50%	Energy: 3.00%
Utilities: 2.60%	Telecommunications: 2.60%
Basic Materials: 2.00%

It’s impressive to see that just Apple and Microsoft hold a whopping 10% of the total holdings. The massive influence these have over the fund is further represented by the massive involvement in the technology sector. Close to 30% of the fund is solely in that area.

Although mid and small-cap stocks are much more represented when compared to a large-cap index, these major sectors are still massively influential.

If you’re looking for a fund with a larger representation of those smaller sectors, you may have to look elsewhere. A total market index looks to give a representation of the entirety of the U.S. market. This means that the large-cap stocks do need their adequate representation.

SWTSX vs. VTSAX

Now, let’s get to this article’s actual SWTSX vs. VTSAX section. We need to make comparisons here. We can’t do a versus article without putting them face to face.

First, let’s look at the fees you can see yourself paying when investing in them. In this case, the VTSAX will have you paying expense ratios of 0.04% while SWTSX has lower 0.03% fees. In this case, the latter does win out as you are paying that little less than the Vanguard fund.

There is another thing when first investing in these funds. VTSAX has a minimum investment of $3,000, while the Schwab fund won’t have you putting that minimum up.

In this case, SWTSX does provide a much lower barrier to entry. This makes it a little more friendly if you’re looking to invest small amounts.

That being said, if you still want to invest in an equivalent, VTSAX has an ETF equivalent in VTI. The same does not have that minimum. We’ve covered that ETF before in our QQQ vs. VTI article. This is another reason to check it out.

When looking at both performances, VTSAX has consistently outperformed SWTSX. When looking at the one-year annualized returns, we can see that these outperform 26.49% vs. 26.45%.

Checking out the 3-year returns, the same applies with 20.24% to 20.14%. In the 5 years, these returns are 17.55% vs. 17.44%. Lastly, in the 10 years, VTSAX outperformed SWTSX 15.95% to 15.85%.

In this case, it’s clear to see people who have invested in the Vanguard fund have outperformed those that invested in SWTXA.

Although there is this restriction of having that minimum investment, that may be worth it. All that being said, do remember that past performance does not guarantee that the same will continue. We can say that it’s a good place to check with that caveat in mind.

Final Thoughts

Giving a cellar winner in the SWTSX vs. VTSAX discussion is difficult. After all this, we have to say that we like both products. Simply put, they both have their place. SWTSX has that lower barrier of entry which makes a great option for those who aren’t necessarily looking to invest large sums.

However, VTSAX has seen very good returns over the years. I’m sure you can see why this is such a difficult decision. Whichever you go with, you’ll be happy to know that you’re putting your money into a very good investment.