A total market index fund is a mutual fund or exchange-traded funds (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 fund's performance aims to mirror that of the index in question. The underlying stocks that these types of funds invest in tend to be diverse in nature, and may include both large-cap stocks issued by well-known corporations, as well as small-cap stocks issued by lesser-known companies. Here are four of today's most prominent ones:
KEY TAKEAWAYS [PLEASE FORMAT INTO A PROPER CALL OUT BOX]
--Total market index funds track the stocks of a given equity index.
--The top three indexes used as benchmarks are the Russell 3000 Index, the S&P 500 Index, and the Wilshire 5000 Total Market Index.
--The most notable total market index fund include: the Vanguard Total Stock Market Index (VTSMX), the Schwab Total Stock Market Index Fund (SWTSX), the iShares Russell 3000 (IWV), and the Wilshire 5000 Index Investment Fund (WFIVX).
Note: Total assets, Morningstar rating, YTD return, and expense ratio figures are current as of August 20, 2019.
Vanguard Total Stock Market Index
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%. Financial services companies have a 15.6% allocation, while healthcare companies have 14.5%. Consumer cyclical and industrial companies round out the top five sectors, with 12.3% and 11% allocations, respectively. Approximately 70% of VTSMX's assets are invested in large market-cap companies. Medium companies account for 19% of the fund's portfolio, and small companies boast a 9% allocation. The fund's top five holdings--Apple, Inc., Microsoft Corp., Amazon.com, Berkshire Hathaway, and Facebook account for approximately 11.7% of total invested assets.
- Assets under management: $823.6 billion
- YTD Return: 20.33%
- Expense Ratio: 0.14%
- Morningstar Rating: 4 stars
Schwab Total Stock Market Index Fund
The Schwab Total Stock Market Index Fund (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 (22.4% allocation), financial services (15.6%), healthcare (14.4%), cyclical consumer (12.4%) and industrials (10.9%). Large-cap stocks account for about 70% of SWTSX's, portfolio, whose top five holdings are identical to those of the aforementioned Vanguard fund, and likewise comprise 11.7% of the portfolio.
- Assets under management: $9.9 billion
- YTD return: 20.42%
- Expense ratio: 0.03%
- Morningstar rating: 4 stars
iShares Russell 3000
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, where the top five names make up 12% of its portfolio. The fund invests about 75% of its assets in large-cap companies.
- Assets under management: $9.5 billion
- YTD return: 17.84%
- Expense ratio: 0.20%
- Morningstar rating: 4 stars
Wilshire 5000 Index Investment Fund
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 comprises around 3,600 companies, the fund typically holds 1,000 to 2,500 stocks. The fund emphasizes large market-cap companies, which account for 74% of its overall portfolio. Medium or mid-cap companies have an 18% allocation, while small-cap companies have an 8% allocation. Like the other funds on the list, WFIVX targets technology, financial services, healthcare, consumer cyclical and industrial sectors, however, its top five holdings comprise only 14% of its portfolio. Unlike the other funds, WFIVX alone includes Alphabet Inc. (Google's holding company) in its top quintet of stock holdings.
- Assets under management: $192.8 million
- YTD return: 19.59%
- Expense ratio: 0.60%
- Morningstar rating: 3 stars
[Important: Small stocks listed in a total market index stocks are often thinly traded, which may result in high trading spreads and significant transaction costs.]