Understanding VTSAX: A 20-Year Performance Review
Most people think building wealth requires picking the next Amazon. The truth? For the last 20 years, one of the most successful strategies has been to do the opposite: buy everything, and then do nothing. This sounds almost too simple to be true, but it’s the core idea behind one of the most popular investments for beginners and experts alike.
This “buy everything” approach is made possible by something called an index fund. To understand what is VTSAX, or the Vanguard Total Stock Market Index Fund, imagine the entire U.S. stock market is one giant pizza with thousands of slices. Instead of trying to guess which slice will taste best, this fund simply buys you the whole pizza.
Why buy the whole thing? In the investing world, this is called diversification. If you bet all your money on just one slice and it turns out to be a dud, you lose. By owning the entire pizza, however, the success of the popular slices easily outweighs the few that don’t work out. This approach dramatically reduces the risk that comes from trying to pick individual winning stocks.
So when you invest in a fund like this, you own a tiny piece of thousands of U.S. companies, from giants like Apple and Microsoft to smaller businesses across the country. You’re no longer betting on a single company’s fate; you’re invested in the broad success of the American economy. Let’s see how that simple strategy has actually performed.
The Real Engine of Growth: How VTSAX Turned $10,000 into $65,000+
So, how does an investment like VTSAX generate that kind of growth? It’s not about picking a winning stock or perfectly timing the market. The impressive VTSAX historical performance comes down to two powerful, yet simple, concepts working together over a long period.
The first concept is the average annual return. Over the last 20 years, VTSAX grew at an average of around 9.7% per year. Think of it like a long road trip; you don’t drive at exactly 60 mph the entire time. Some years, the market speeds up with high returns (+20%), and some years it slams on the brakes with negative returns. The average annual return simply smooths out all those bumps into one number that shows the overall pace of your journey.
That steady average is then supercharged by the second concept: compound interest. This is where your money starts making its own money. In the first year, your investment earns a return. The next year, you earn a return on your original money and on the return you just earned. This creates a snowball effect that starts small but becomes incredibly powerful over decades, doing the heavy lifting for you.
Putting it all together, that initial $10,000 investment grew through the market’s ups and downs, powered by an engine of compounding returns. But as the road trip analogy suggests, averaging out the bumps doesn’t mean the bumps disappear.
Sounds Great, But What’s the Catch? Understanding Market Crashes
That road trip analogy is helpful, but it leaves out one crucial detail: some of those bumps feel more like deep, jarring potholes. The 20-year journey for VTSAX included major market crashes, like the 2008 financial crisis and the sharp, sudden drop in early 2020. During these times, seeing your investment value fall by 30% or more can be terrifying. This up-and-down swing is called volatility, and it’s the unavoidable catch—the price of admission for the kind of long-term growth the stock market offers.
This is where the 20-year perspective becomes so powerful. That impressive $65,000+ figure we discussed already includes the full impact of those scary downturns. The key is that historically, the market has always recovered and climbed to new highs. The biggest risk for most people isn’t the crash itself, but the panic it causes. Selling your investment after it has dropped just locks in your losses and prevents you from participating in the eventual recovery.
Ultimately, investing in something like VTSAX isn’t about avoiding the storms; it’s about having a ship sturdy enough to ride them out. It requires patience and the discipline to stay the course, trusting that decades of history are on your side. While you can’t control when the market will dip, there is another powerful factor you can control that has a massive impact on your final returns.
The Tiny Fee That Can Cost You a Fortune: Why VTSAX’s Low Cost Matters
While you can’t control market storms, you have complete control over another powerful factor: the cost of your investment. Every fund, including VTSAX, charges a small annual fee to cover its operating expenses. This is called the expense ratio, and keeping it as low as possible is one of the keys to successful long-term investing.
The impact of VTSAX’s expense ratio on returns is where it truly shines. Its fee is incredibly low, at just 0.04%. In contrast, many other funds can charge 1% or more. That tiny percentage difference adds up to a huge dollar amount over time. On a $10,000 investment, the yearly cost is staggering:
- Typical 1% fee: $100 per year
- VTSAX’s 0.04% fee: $4 per year
That extra $96 isn’t just saved; it stays in your account, working and growing for you. Over decades, this difference can amount to tens of thousands of dollars in lost growth. Choosing low-cost index funds guarantees that more of your money stays in your pocket, compounding for your future. This commitment to low fees is a defining feature of VTSAX, but it’s not the only simple, low-cost option out there.
VTSAX vs. The “Other Guys”: Is There a Better Simple Option?
As you explore simple investing, you’ll quickly notice other popular fund names, like VOO and FSKAX, mentioned alongside VTSAX. It’s natural to wonder if you’re missing out on something better. The good news is that these funds are more like cousins than distant relatives, and their goals are remarkably similar.
One popular alternative, VOO, tracks a famous group of companies called the S&P 500 index. Instead of holding the entire U.S. market like VTSAX, VOO holds only the 500 largest American companies. Because these giants make up most of the market’s value, the long-term growth of VTSAX vs VOO is nearly identical. You’re simply choosing between owning the whole pizza or just the biggest 500 slices—either way, you get a very satisfying meal.
You might also see FSKAX from the company Fidelity. Think of this as Fidelity’s version of VTSAX; it’s also a total stock market index fund with a tiny expense ratio. When comparing the performance of VTSAX vs FSKAX, their charts look virtually indistinguishable. It’s like choosing between two very similar brands of the same product.
Ultimately, the choice between these specific funds is far less important than the decision to start investing in a low-cost, diversified fund in the first place. The difference in their results over decades is typically minor. The real victory is picking one, getting started, and letting your money work for you.
Your Next Step: Using This Knowledge for Your Long-Term Goals
Just a few minutes ago, the world of investing might have felt like a members-only club, full of complex charts and risky bets. You now see the power behind one of its simplest ideas: you don’t have to pick individual winning stocks when you can own a small piece of the entire market. The 20-year return of a fund like VTSAX is no longer just a number, but proof of a patient, accessible strategy.
This historical performance reveals a lesson that goes beyond any single fund. It shows that a long term investment strategy built on broad diversification and consistency—staying the course through good years and bad—has been a powerful force for growth. This reframes investing from a frantic daily activity to a calm, decades-long journey toward your personal goals, whether that’s a comfortable retirement or a down payment far in the future.
Your journey doesn’t have to stop here. To turn this knowledge into confidence, a great first step is simply to explore how to start investing by visiting the website of a major brokerage. You don’t need to open an account or invest a dollar. By just looking, you are taking an active role, transforming from a passive saver into an informed person who is ready to build their own financial future.