What Is a Total Stock Fund?

A total stock fund is a mutual fund or exchange traded fund that holds every stock in a selected market. A total stock fund seeks to replicate the broad market by holding the stock of every security that trades on a certain exchange, invests in a certain country, or passes basic thresholds of size (market cap) or trading volume.

Key Takeaways

  • A total stock fund is a mutual fund or exchange-traded fund that holds stock of every security in a selected market, whether that's of a certain exchange, country, or stocks that pass basic thresholds of size (calculated by market capitalization) or trading volume.
  • These super-broad index funds tend to have less volatility than even large indices like the S&P 500 because they hold so many companies' stock.

How Total Stock Funds Work

Total stock funds, also called total stock market index funds or total market funds, may track a broad index such as the Wilshire 5000, Russell 2000, or MSCI U.S. Broad Market.

These super-broad index funds tend to have less volatility than even large indices like the S&P 500 because they hold so many companies' stock. Most total stock funds will have portfolio weightings based in some way on market cap, but they are not necessarily just market-cap weighted, like the S&P 500 is.

Total stock funds may not capture a full 100% of the market capitalization of their target market (such as the whole United States or all small-cap stocks), but they are usually able to capture 95% or more by owning the first few thousand stocks in order of market capitalization.

One of the largest and oldest total stock funds is the Vanguard Total Stock Market Index Fund, which has approximately $163.4 billion in assets under management and owns more than 3,000 of the largest companies that trade on the New York Stock Exchange and Nasdaq.

Performance of Total Stock Funds

As of Oct. 3, 2020, the Vanguard Total Stock Market Index ETF (VTSMX) had a 10-year annualized return of 13.30%. The Vanguard 500 Index Fund (VFINX) had a 10-year annualized return of 13.48% for the same period. The returns were the same, with a slight advantage to the total market fund. This is likely due to the small- and mid-cap holdings in the total market fund that the S&P 500 fund did not hold.

Market Cap Weights

Mutual funds and index funds can be organized in many different ways. Perhaps the most common way is by market cap. Large-cap funds (like the S&P 500) typically invest in companies with a total market capitalization of $10 billion or more. Investments in individual companies are not even, with larger companies receiving more. Mid-cap funds typically invest in companies with a total market capitalization between $2 billion and $10 billion.

Small-cap funds typically invest in companies with a total market capitalization of less than $2 billion. Some mutual fund companies even offer micro-cap funds, which invest in companies with a total market capitalization of less than $50 million.