Total Market Index
Quick Definition
A broad market index that aims to represent the entire investable stock market of a country or region, including large, mid, small, and micro-cap stocks.
What Is Total Market Index?
A total market index tracks the performance of virtually all publicly traded stocks in a given market, providing the broadest possible diversification. Unlike the S&P 500 (which covers only 500 large-cap stocks), a total market index includes large, mid, small, and micro-cap companies.
Major Total Market Indexes:
| Index | Coverage | Stocks |
|---|---|---|
| CRSP US Total Market Index | All US stocks | 4,000+ |
| Russell 3000 | 3,000 largest US stocks | 3,000 |
| Wilshire 5000 | All US-listed stocks | ~3,500 |
| FTSE Global All Cap | All world stocks | 9,000+ |
Popular Total Market ETFs/Funds:
| Fund | Tracks | Expense Ratio | Holdings |
|---|---|---|---|
| VTI | CRSP US Total Market | 0.03% | 4,000+ |
| ITOT | S&P Total Market | 0.03% | 3,700+ |
| SWTSX | Schwab Total Stock | 0.03% | 3,400+ |
| FSKAX | Fidelity Total Market | 0.015% | 4,000+ |
| VT | FTSE Global All Cap | 0.07% | 9,800+ |
Total Market vs S&P 500:
| Feature | Total Market (VTI) | S&P 500 (VOO) |
|---|---|---|
| Holdings | 4,000+ | 500 |
| Small-cap exposure | Yes | No |
| Mid-cap exposure | Yes | Limited |
| Historical returns | Very similar (~0.1% difference annually) | Very similar |
| Diversification | Broader | Still well-diversified |
Why Choose Total Market:
- Maximum diversification — every investable US stock
- Small-cap premium — historically small-caps earn a slight premium
- No selection bias — no committee deciding which stocks to include
- Single-fund simplicity — one fund covers the entire market
Why It Matters: For most investors, a total market index fund (VTI or FSKAX) combined with an international fund (VXUS) and a bond fund (BND) creates a complete, low-cost portfolio — often called a "three-fund portfolio."
Total Market Index Example
- 1VTI holds 4,000+ stocks including small companies like regional banks that the S&P 500 misses entirely
- 2The three-fund portfolio (VTI + VXUS + BND) provides global diversification for under 0.05% average expense ratio
Related Terms
Index Investing
A passive strategy that aims to match market returns by holding all securities in a market index in proportion to their weights.
S&P 500 Index Fund
A fund that tracks the S&P 500 index by holding all 500 large-cap US stocks in proportion to their market capitalization.
Cap-Weighted Index
An index where each stock's weight is proportional to its total market capitalization, meaning larger companies have a bigger impact on index performance.
Equal-Weight Index
An index where each constituent stock receives the same allocation weight regardless of market capitalization, giving smaller companies the same influence as larger ones.
Exchange-Traded Fund (ETF)
A basket of securities that trades on an exchange like a stock, offering diversification with the flexibility of intraday trading.
Vanguard
The world's largest mutual fund company, founded by John Bogle in 1975, pioneering low-cost index investing with a unique investor-owned structure.
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