VTSAX is called 'the total stock market'. More accurately, this is a vanguard fund that represents the broad US stock market. Today it is showing on Google Finance as being up some 1.2%.
However, another fund from Vanguard is called VTI and is only up 0.26%. VTI is also a fund that seeks to replicate the entire stock market (if you consider entire to mean US only that is)
So why the discrepancy?
Some days, you may even see that one of these is in the positive, and one in the negative. But if they are both funds that are representing the entire US Stock market, and both issued by Vanguard, how could one be up more than 100 basis points today?
Understanding Mutual Funds vs ETFs
This phenomenon highlights one of the few differences between a mutual fund and an ETF (exchange traded funds). Both are often called 'funds'. Both are also often called 'low cost vanguard funds', both also are common building blocks of passive portfolios. The difference we see in this example is related to the 'exchange traded' aspect of the fund. The ETF trades real time, like a stock.
This means that there is a bid/ask spread at play, and the number you see ($109.76) was the last price that was paid for VTI, the transaction happened at some point during the trading day today. If you head here to check the current price https://www.google.com/finance?q=vti you will see that it has changed from $109.76, and will be constantly moving up and down.
Conversely, if you head over to check the price of VTSAX at any time during trading today (June 11th) it will show the same price $53.30, regardless of the bid/ask (demand and supply). If you want to buy it, your transaction will generally settle on that day, after the market closes.
The price you pay for VTSAX will be based upon the NAV (net asset value) of the fund. After the close of the market, the components of the fund (the shares it owns) are added up. The sum of this is then divided by the amount of shares of the fund, creating the price of $53.30 (yesterday). Today, when the market closes, if VTI is still up a similar amount it will likely mean that the underlying assets have appreciated, so the price of VTSAX will go up.
VTI, and all ETFs can also trade at Premiums or Discounts to NAV. Their market price is dictated by real time supply and demand needs via the bid ask/spread.
Conclusion
You'll see two products that are pretty much identical trade at quite different prices simply due to the manner in which they trade. A 'fund' should be used to describe a Mutual Fund in this case, and it is less liquid than an ETF, the liquidity we see by ETFs moving freely during the market hours gives a more realistic price, whereas the mutual fund is always going to be priced after the close of play.
If you look at VTI yesterday, it will give a much closer figure to the gain showing on VTSAX today.
However, another fund from Vanguard is called VTI and is only up 0.26%. VTI is also a fund that seeks to replicate the entire stock market (if you consider entire to mean US only that is)
So why the discrepancy?
Some days, you may even see that one of these is in the positive, and one in the negative. But if they are both funds that are representing the entire US Stock market, and both issued by Vanguard, how could one be up more than 100 basis points today?
Understanding Mutual Funds vs ETFs
This phenomenon highlights one of the few differences between a mutual fund and an ETF (exchange traded funds). Both are often called 'funds'. Both are also often called 'low cost vanguard funds', both also are common building blocks of passive portfolios. The difference we see in this example is related to the 'exchange traded' aspect of the fund. The ETF trades real time, like a stock.
This means that there is a bid/ask spread at play, and the number you see ($109.76) was the last price that was paid for VTI, the transaction happened at some point during the trading day today. If you head here to check the current price https://www.google.com/finance?q=vti you will see that it has changed from $109.76, and will be constantly moving up and down.
Conversely, if you head over to check the price of VTSAX at any time during trading today (June 11th) it will show the same price $53.30, regardless of the bid/ask (demand and supply). If you want to buy it, your transaction will generally settle on that day, after the market closes.
The price you pay for VTSAX will be based upon the NAV (net asset value) of the fund. After the close of the market, the components of the fund (the shares it owns) are added up. The sum of this is then divided by the amount of shares of the fund, creating the price of $53.30 (yesterday). Today, when the market closes, if VTI is still up a similar amount it will likely mean that the underlying assets have appreciated, so the price of VTSAX will go up.
VTI, and all ETFs can also trade at Premiums or Discounts to NAV. Their market price is dictated by real time supply and demand needs via the bid ask/spread.
Conclusion
You'll see two products that are pretty much identical trade at quite different prices simply due to the manner in which they trade. A 'fund' should be used to describe a Mutual Fund in this case, and it is less liquid than an ETF, the liquidity we see by ETFs moving freely during the market hours gives a more realistic price, whereas the mutual fund is always going to be priced after the close of play.
If you look at VTI yesterday, it will give a much closer figure to the gain showing on VTSAX today.