How much does VTSAX grow per year?
You’ve seen the name “VTSAX” pop up online, praised as one of the best ways to start investing. It naturally leads to the most important question: if you put your money in, how much does VTSAX grow per year? The answer isn’t a single, simple number, but understanding the reality is far more valuable.
Unlike a savings account with a fixed interest rate, historical VTSAX returns show dramatic swings. To get a realistic picture, we need to examine the actual performance from past decades—the great years, the down years, and what it all truly means for growing your money over the long term.
What Is VTSAX? A Look Inside the ‘Market Basket’
VTSAX is an index fund. Imagine trying to pick the most successful store in a giant shopping mall. Instead, you could buy a tiny ownership slice of every single store. That’s VTSAX. It’s a massive investment basket holding small pieces of thousands of U.S. companies, from the biggest names to smaller businesses.
With a single purchase, you become a part-owner in the entire U.S. stock market. This built-in strategy of spreading your money is called diversification, and it’s your best defense against risk. If one company has a terrible year, its poor performance is cushioned by the thousands of others. Because you own a piece of everything, what drives total stock market index fund returns is the overall health of the U.S. economy.
Historical Performance: The Average vs. Reality
Since its creation in 2000, VTSAX has delivered an average annual return of around 8-9%. This figure rolls all the great years, bad years, and okay years into one simple number, giving you a 30,000-foot view.
However, relying on that average for next year’s performance is a mistake. In reality, the fund’s annual performance is rarely close to the average. To see just how much returns can swing, look at the actual VTSAX performance over a recent decade:
2023: +26.04%
2022: -19.53%
2021: +25.68%
2020: +20.94%
2019: +30.86%
2018: -5.19%
2017: +21.17%
2016: +12.63%
2015: +0.33%
2014: +12.56%
A year of fantastic 26% growth was immediately preceded by a painful 19% loss. This is market volatility—the natural and expected ups and downs of investing. These swings are not a sign of a problem; they are a normal part of how the market works.
Beyond Price: The Two Ways Your VTSAX Investment Grows
When you invest in a fund like VTSAX, your money grows in two distinct ways. The first is capital appreciation, which is the increase in the price of your VTSAX shares as the companies within the fund become more valuable.
The second is dividends. These are small, regular cash payments that many companies distribute to shareholders as a way of sharing profits. When you see a performance figure like “+26% in 2023,” you’re looking at the total return, which combines both capital appreciation and dividends.
For most investors, these dividends are automatically used to buy more shares of VTSAX. This automatic reinvesting is what fuels the magic of compounding, as those newly purchased shares now have the chance to grow and earn their own dividends.
The Tiny Fee That Matters: How VTSAX’s Low Cost Maximizes Growth
Managing an investment fund has a cost called the expense ratio—a tiny annual fee taken from your investment to cover operating expenses. Your goal is to keep this fee as low as possible so more of your money can stay invested and grow.
While a fraction of a percent might sound insignificant, the impact over decades is enormous. This is where low-cost index funds like VTSAX have a powerful advantage. Its expense ratio is an incredibly low 0.04%, amounting to just $4 per year for every $10,000 invested. Minimizing costs is a fundamental reason VTSAX is considered one of the best total market funds for growth.
What If I Lose Money? How to Survive a Market Downturn
The most important question for any new investor is: What if I lose my money? You will have down years. Because VTSAX holds the entire U.S. stock market, it fully experiences the market’s temporary declines. This is the unavoidable nature of stock market risk—the price of admission for higher long-term growth.
Successful investors learn to zoom out. Historically, even after the most dramatic drops, the market has always recovered and climbed to new highs. Among the many factors affecting VTSAX returns, your time horizon is the most powerful. The longer it is, the more those bumps smooth out into a steady upward climb.
The biggest mistake an investor can make is selling in a panic. Pulling money out when the market is down is the only way to guarantee you lock in those losses permanently. Staying invested through the dips is what allows you to capture the powerful recovery that follows.
The ‘Snowball Effect’: How Compounding Supercharges Growth
Enduring market volatility sets the stage for the most powerful force in finance: compounding. It’s the process of your earnings generating their own earnings. When you reinvest gains from VTSAX, you’re earning returns not just on your initial investment, but also on all the gains that came before.
For example, if you invest $10,000 and get a 10% return, you have $11,000. The next year, a 10% return is calculated on that new, larger amount, earning you $1,100 instead of $1,000. After 30 years, this accelerating growth is the difference between a small sum and a significant nest egg.
This effect has one non-negotiable ingredient: time. Long-term investing focuses less on timing the market and more on time in the market.
VTSAX vs. The Alternatives: Is It Really the ‘Best’ Choice?
Is VTSAX the absolute best vehicle for the job? A common alternative is an S&P 500 index fund (like VOO), which holds only the 500 largest U.S. companies. While VTSAX owns the entire U.S. market, the VTSAX vs VOO performance is remarkably similar because those 500 giants represent over 80% of the market’s value.
This similarity also holds true when comparing VTSAX to competitors like Fidelity’s FZROX. Ultimately, agonizing over which of the best total market funds for growth to pick is a trap. The difference in outcome between these excellent, low-cost options is tiny compared to the massive cost of delaying your decision. The most important choice is to choose one, start investing, and let time work for you.
The Real Answer to VTSAX’s Growth (And What to Do Next)
So, how much does VTSAX grow per year? For any single year, nobody knows. It might be up 25% or down 15%. The more important truth is that over decades, the historical trend has been a powerful engine for growth, rewarding patience above all else.
Your next step isn’t to find the perfect fund, but to ask a simple question: “What are my financial goals, and what is my timeline?” If you have a long-term horizon, you now have the confidence to see if a low-cost fund like VTSAX fits your plan. You’ve already taken the biggest step by learning to think like an investor.