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Have you ever heard the term VTSAX?  If you are in the financial independence world you probably have as it is the star of the book “The Simple Path to Wealth” by JL Collins.  It is a broad-based index fund available in America (more below on British stuff) that is one of the main vehicles people use to get to financial independence.

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But what actually is in VTSAX?  Do you know what you are buying when you get it? Obviously, Katie got excited and created some charts and graphs to show you exactly where your money goes when you buy this legendary fund!  Read on to find out exactly what is in VTSAX!

What do you get when you buy VTSAX from Vanguard?

VTSAX is a broad-based index fund created by Vanguard.  It is the total US stock market and is made of 4068 companies.  VTSAX is made up of 98.9% equities and 1.1% short term reserves.

The Simple Path to wealth became one of the biggest books in the finance world helping to demystify investing and its core recommendation for Americans was to buy this one simple fund.

As with nearly all index funds when you buy a share of this index your money gets spread across a range of companies making you a part owner of all 4068 companies in the list.  Katie become fascinated by visualising index funds and has disappeared into the data to create this amazing chart!

The chart below works best full screen, on a laptop, or computer.  You can hover your cursor over the chart and each of the little boxes will show you more information, the company, the size in the market and more.

Have a play with this visualisation of VTSAX

What does it all mean?

If you invest $100 into VTSAX then your money is split evenly over the above companies.  You would own the percentage shown of Apple, Microsoft, Facebook and Tesla and more.

This changes slightly every month as companies grow and shrink in the market.  The idea is that you become an owner off ALL the major companies you can invest in the USA.

Explaining an index funds in words is difficult.  We tell people you are buying a share in a fund of companies.  We tell people that you become a part owner in thousands of different companies.  We tell people that they are buying a tiny slice of every company in the market, but it still doesn’t really click until they see and take time to understand Katie’s chart.

You can see exactly where your money goes and in what proportions!  Just scroll across the chart and you can see what you now own if you buy this fund.

If you put $100 into the fund, then you own $5.60 of Apple stock, $5.10 of Microsoft stock and $3.30 of Google stock etc.

Industry sectors

The purpose of an index fund is to allow you to own a broad range of stocks over a broad range of industries.  If you had owned just transportation companies in the COVID market crash of 2020 you would have been in real trouble as all travel was grounded!

Below you can see VTSAX split by industries.  This shows the percentage of your money that goes into each industry sector.  The beautiful thing about funds like this is that your money is split based on the size of that sector at that time.  Right now, technology companies are the most dominant and profitable so most of your money goes into that sector.

Of every $100 you put into the fund $25.20 goes into the tech companies and $3.50 goes into utility companies.

What happens after you buy?

Now you know exactly where your money goes if you buy VTSAX.  What happens next is down to the market.  The route to financial independence from here is made of two things, capital appreciation and dividend income.

Each year the companies make money and pay out dividends to their share holder or owners (you).  You can set these dividends to auto-reinvest so you own more of the stock, and it compounds away for you.

​The Simple path to wealth is to buy a broad-based index fund, as much as you can as quickly as you can and allow it to compound over time.

More coming

Katie has been having great fun playing with the data and is creating more charts.  If you want to know more about VTSAX then visit our page about it here: VTSAX explained.

Look out for more articles explaining index investing and financial independence soon!  Thanks for reading the blog and please put your questions and thoughts below!

Sending love

Katie and Alan

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