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A total market index fund is a mutual fund or exchange traded fund (ETF) that tracks an equity index such as the Russell 3000 Index, the S&P 500, or the Wilshire 5000 Total Market Index, as its benchmark. By investing in stocks linked to a given index, a total market index fund's performance aims to mirror that of the index in question.

The underlying stocks that these types of funds invest in are often highly diverse and may include both large-cap stocks issued by well-known corporations, as well as small-cap stocks issued by lesser-known companies.

Below are four of today's most prominent ones. Total assets, Morningstar rating, year-to-date (YTD) returns, and expense ratio figures are current as of July 2020.

Key Takeaways

  • Total market index funds track the stocks of a given equity index.
  • The major broad-based indexes used as benchmarks are the Russell 3000, the S&P 500, and the Wilshire 5000 Total Market Index.
  • The best total market index funds by popularity include the Vanguard Total Stock Market Index (VTSMX), the Schwab Total Stock Market Index Fund (SWTSX), the iShares Russell 3000 (IWVB), and the Wilshire 5000 Index Investment Fund (WFIVX).

1. The Vanguard Total Stock Market Index (VTSMX)

The Vanguard Total Stock Market Index (VTSMX) seeks to track the investment results of the CRSP U.S. Total Market Index, comprising approximately 100% of the investable U.S. stock market. Its companies, which represent a cross-section of market capitalizations, primarily trade on the New York Stock Exchange and NASDAQ.

Technology companies account for the largest share of VTSMX's portfolio, at 22.3%. Healthcare companies have a have a 15.5% allocation, while financial services have 13.4%. Consumer cyclical and industrial companies round out the top five sectors, with 10.6% and 9% allocations, respectively.

The Vanguard Total Stock Market Index is considered a large-cap blend, evidenced by its top five holdings: Microsoft Corp., Apple, Inc., Amazon.com, Facebook Inc A, and Alphabet Inc A. In fact, 20% of VTSMX's assets lie within its top 10 holdings.

  • Assets under management: $872.08 billion
  • 2019 return: 30.65%
  • Expense ratio: 0.04%
  • Morningstar rating: 4 stars

2. The Schwab Total Stock Market Index (SWTSX)

The Schwab Total Stock Market Index (SWTSX) tracks the total return of the entire U.S. equity market as measured by the Dow Jones U.S. Total Stock Market Index. SWTSX currently focuses on technology (22.3% allocation), healthcare (15.4%), financial services (13.6%), cyclical consumer (10.65%), and communication services (10.1%).

Almost identical to the aforementioned Vanguard Total Stock Market Index fund, SWTSX's top holdings are in Microsoft, Apple, Amazon, Facebook Inc A, and Berkshire Hathaway Inc B, with also its top 10 holdings comprising 20% of the portfolio.

  • Assets under management: $10.7billion
  • 2019 return: 30.88%
  • Expense ratio: 0.03%
  • Morningstar rating: 4 stars

3. The iShares Russell 3000 ETF (IWV)

The iShares Russell 3000 (IWV) is an exchange traded fund that tracks the performance of the Russell 3000 Index, which measures the investment results of the broad U.S. equity market.

Like its peers, IWV uses an indexing approach to select a sample of stocks that represent the underlying benchmark. IWV's sector allocations and top holdings are similar to those of the Vanguard and Schwab funds.

IWV is led by investments allocated 23.5% in technology, 14.9% in healthcare, 13.1% in financial services, and 11.1% in consumer cyclical. It has only slightly more assets weighted in its top 10 holdings: 23%. The fund invests about 77% of its assets in large-cap companies.

  • Assets under management: $9.3 billion
  • 2019 return: 30.78%
  • Expense ratio: 0.20%
  • Morningstar rating: 4 stars

Small stocks listed in a total market index fund are often thinly traded, which may result in high trading spreads and significant transaction costs.

4. Wilshire 5000 Index Investment Fund (WFIVX)

The Wilshire 5000 Index Investment Fund (WFIVX) is a mutual fund that tracks the investment results of the Wilshire 5000 Index, a capitalization-weighted index of the market value of all actively traded U.S.-headquartered stocks.

While the index consists of around 3,115 companies, the fund typically holds 1,000 to 2,500 stocks. The fund emphasizes large market-cap companies with market values greater than $10 billion.

Like the other funds on the list, WFIVX targets technology, financial services, healthcare, consumer cyclical, and industrial sectors, though its top ten holdings comprise 24% of its portfolio. Unlike the other funds, WFIVX alone includes Alphabet Inc Class C in its top quintet of stock holdings.

  • Assets under management: $185.07 million
  • 2019 return: 29.74%
  • Expense ratio: 0.60%
  • Morningstar rating: 3 stars