In this guide, we compare two of the most popular S&P 500 tracking investment products: VFIAX vs SWPPX.
VFIAX and SWPPX are essentially the same product, with some small nuances differentiating them.
Regardless, both hold some very Undervalued Stocks that can reward investors over the long run.
Neither fund will invest in new start-ups or Penny Stocks. If that type of investing interests you, check out our list of Best Upcoming IPOs to Buy!
VFIAX vs SWPPX – Full Comparison
Below you will find an in-depth comparison between VFIAX vs SWPPX.
Here is theVFIAXdescription from Vanguard’s website.
“As the industry’s first index fund for individual investors, the 500 Index Fund is a low-cost way to gain diversified exposure to the U.S. equity market.
The fund offers exposure to 500 of the largest U.S. companies, which span many different industries and account for about three-fourths of the U.S. stock market’s value.”
For full disclosure, I have a significant amount of my personal holdings invested in VFIAX.
Best Vanguard Index Funds
Here is the SWPPX fund description from the Charles Schwab website.
“The fund’s goal is to track the total return of the S&P 500 Index. A straightforward, low-cost fund with no investment minimum.
The Fund can serve as part of the core of a diversified portfolio.
Simple access to 500 leading U.S. companies and captures approximately 80% coverage of available U.S. market capitalization. Invests in some of the most well-known U.S. based companies.”
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VFIAX vs SWPPX: Custodial Provider
VFIAX is an S&P 500 index fund vehicle offered by Vanguard. SWPPX is an S&P 500 index fund vehicle offered by Charles Schwab.
Both Vanguard and Charles Schwab are extremely well-respected financial companies; however, I prefer Vanguard.
I personally only have accounts with Vanguard and Fidelity, but Charles Schwab would be my next choice.
These companies are referred to as “discount brokerages” because their fees are so low.
I love purchasing funds through discount brokerages because I receive the same investments for less.
Vanguard, Fidelity, and Schwab are the Walmart and Costco of finance.
VFIAX vs SWPPX: Minimum Investment
VFIAX has a $3,000 minimum investment, but there is no minimum investment requirement for SWPPX.
From new investors I have talked with, a minimum investment is one of the most discouraging aspects of picking their first investment.
Thus, SWPPX is going to be a better choice for new investors, or someone without a lot of upfront capital to invest.
$3,000 can be a big barrier to entry, but Vanguard does have S&P 500 ETFs with no minimums (VOO is a good example).
Additionally, VFIAX and SWPPX both allow fractional share purchases and automatic dividend reinvestments.
For example, you can buy 0.23 shares of VFIAX or SWPPX.
VFIAX vs SWPPX: Dividend Reinvestment
VFIAX and SWPPX both allow automatic dividend reinvestments, contributions, and withdrawals.
This is a huge advantage that both of these funds offer by being index funds, rather than an ETF.
For example, say you received $45 in quarterly dividends. This is not enough money to purchase an entirely new share.
Well, that doesn’t matter, you can just reinvest those dividends in a partial share and walk away.
Always reinvesting your dividends is probably one of the best ways to secure long-term returns.
I personally always reinvest my dividends now.
I know a lot of investors who live off their dividends (or spend it as fun money), but you’re blowing a big opportunity!
So, you may be asking, “What are the underlying holdings for VFIAX and SWPPX?” Here are some of the top holdings for VFIAX (in no particular order):
- Goldman Sachs
- Berkshire Hathaway
Here are some of the top holdings for SWPPX (in no particular order):
- United Health Group
- Johnson & Johnson
Now, it may seem like they have different investment holdings. It’s actually the opposite.
VFIAX and SWPPX really own the exact same holdings of the S&P 500, in the exact same proportion.
VFIAX has been growing in popularity as a staple fund for Vanguard in recent years. Here are a few of my favorite things about VFIAX:
- Vanguard Product
- Automatic Dividend Reinvestment
- Large Diversification
- Vanguard Mobile App/Website
First, as I mentioned above, I have a strong bias towards Vanguard because I love their founder, John Bogle.
Bogle is the inventor of the index fund, and he based his entire company around the mission of low-cost investing.
Low-cost investing means shareholders keep a larger portion of the investment returns.
Also, I tend to believe Vanguard has a superior mobile app and website.
It’s almost too easy to execute buy or sell orders off your phone!
Next, VFIAX offers wide diversification, across industries, geography, and currencies by purchasing one share.
Finally, VFIAX is very tax-efficient by keeping its fund turnover low. This essentially means they don’t buy or sell much.
By not selling often, they limit the capital gains passed to investors, which are reported on a 1099-Brokerage Tax Statement.
Additionally, Vanguard has user-friendly 1099 Statements if you like to do your own tax return.
Here are a couple of downsides to investing in VFIAX:
- No Intraday Trading
- $3,000 minimum investment
- 0.04% Expense Ratio
As previously mentioned, VFIAX does have a $3,000 minimum investment, which is a massive roadblock to new investors.
I didn’t have two nickels to rub together when I started investing, much less $3,000.
Next, VFIAX has a 0.04% expense ratio, which is twice as high as SWPPX (0.02% discussed below).
Finally, because VFIAX is an index fund, there is no intraday trading or real-time pricing.
This means you won’t see your account balance change during the day, and your trades aren’t executed until a few hours past market close.
Again, as I mentioned earlier, there isn’t a huge difference in VFIAX vs SWPPX, but these are my favorite things about SWPPX:
- Match The Market
- 0.02% Expense Ratio
- Dividend Reinvestments
First, SWPPX is a passively managed index fund. This means investors are guaranteed to match the overall market returns.
Nothing more, but also nothing less.
This may seem boring, or counterintuitive, but passive index funds outperform 90% of active funds over a 15-year horizon.
As the old adage goes, keep it simple silly. Here are why index funds typically outperform:
- Low Costs
- No Human Intervention
Next, SWPPX has a 0.02% expense ratio, which is half of VFIAX. Two basis points will not break your retirement plan.
However, if you’re going to own the exact same underlying holdings, we should try to pay the lower fee.
Lastly, by eliminating any minimum investment, SWPPX is going to be more welcoming towards new investors.
Here are a couple of downsides to SWPPX:
- No Intraday Trading
- No Active Pricing
I won’t beat the nail to death on this topic, but SWPPX does not allow intraday trading or active pricing because it’s an index fund.
If you want to day-trade or capitalize on quick price movements, SWPPX is not the investment vehicle for you.
Personally, we do not recommend day trading, and there’s a reason the Best Investors Are Dead.
Dead investors never sell their investments; they just sit in their account for eternity, racking massive gains!
Other Fund Comparisons
I have written many other investment fund comparison reviews. I highly recommend reading any of the following for more information.
- VFIAX vs VOO
- VFIAX vs FXAIX
- VTSAX vs VFIAX
- SWPPX vs VTSAX
- SWPPX vs VOO
- SWPPX vs SWTSX
For more investing information, I suggest subscribing to the Wall Street Journal. They have tremendous information and reporting!
VFIAX and SWPPX – Final Thoughts
VFIAX and SWPPX are both S&P 500 tracking index funds. The biggest differences are expense ratios, custodial providers, and minimum investments.
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VFIAX vs SWPPX FAQ
What’s the difference between VFIAX and SWPPX?
VFIAX is an S&P 500 index fund offered by Vanguard, and SWPPX is an S&P 500 index fund offered by Charles Schwab.
Is VFIAX or SWPPX Better?
SWPPX offers a lower expense ratio than VFIAX. The returns will be comparable.
What are the Holdings of VFIAX and SWPPX?
VFIAX and SWPPX track the S&P 500.
How do I buy VFIAX or SWPPX?
You can buy VFIAX or SWPPX on any brokerage website. I prefer to use Vanguard or Charles Schwab.