Best Total Stock Market Index Funds | Bankrate (2024)

Index funds have gained enormous popularity with investors over the past few decades as a cost-effective way to gain access to highly diversified portfolios. Through mutual funds and ETFs, total market index funds allow investors to purchase a basket of stocks that track an index focused on the overall U.S. stock market or markets around the world. They can be a great way for investors to benefit from a country’s economic growth without having to select which individual companies to invest in.

Here’s what else you should know about total market index funds and a few options to consider.

What is a total stock market index fund?

A total market index fund is a mutual fund or ETF that tracks an index focused on virtually the entire stock market of a country or region. Many people are familiar with index funds that track popular indexes such as the or the Dow Jones Industrial Average, but those funds hold companies with large market capitalizations and exclude small and mid-sized companies. Total market funds hold companies across the market-cap spectrum and allow investors to earn the return of the overall stock market.

Most total market index funds are weighted by market capitalization, so the funds will still have a large exposure to the largest companies in the U.S. such as Amazon, Apple and Microsoft. But the funds will also own small-cap companies that may have more room to grow and potentially earn higher returns than their large-cap counterparts.

Total market index funds typically come with very low fees, allowing more of the return to fall to the funds’ investors. This is a key part of index-fund investing, which allows investors to earn the return of the market without needing to have deep financial knowledge or stock-picking skills. Keeping expenses low has proven to be a successful investing strategy for many.

Top-performing total stock market ETFs

Bankrate selected its top funds based on the following criteria:

  • U.S. funds that appear in ETF.com’s screener for U.S. total market
  • Funds among the top performers over the last five years
  • Performance measured on July 13, 2023 using the most recent figures

Vanguard Total Stock Market ETF (VTI)

This ETF seeks to track the performance of the CRSP U.S. Total Market Index and invests in large-, mid- and small-cap companies across the value and growth styles.

Year-to-date performance: 17.2 percent
Historical performance (5-year annual): 10.8 percent
Expense ratio: 0.03 percent

Schwab U.S. Broad Market ETF (SCHB)

This fund’s goal is to track the total return of the Dow Jones U.S. Broad Stock Market Index, which includes companies across the market-cap spectrum.

Year-to-date performance: 17.3 percent
Historical performance (5-year annual): 10.9 percent
Expense ratio: 0.03 percent

iShares Core S&P Total U.S. Stock Market ETF (ITOT)

This fund seeks to track the performance of the S&P Total Market Index and currently holds more than 3,300 securities.

Year-to-date performance: 17.2 percent
Historical performance (5-year annual): 10.8 percent
Expense ratio: 0.03 percent

SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)

This fund seeks to match as closely as possible the total return of the S&P Composite 1500 Index, which represents about 90 percent of the investable U.S. equity market.

Year-to-date performance: 16.9 percent
Historical performance (5-year annual): 11.3 percent
Expense ratio: 0.03 percent

Top-performing total stock market mutual funds

Many of the ETFs mentioned above are also offered in mutual fund form. But keep in mind that mutual funds typically carry investment minimums of a few thousand dollars and can only be traded once a day at the fund’s closing NAV. On the plus side, they may come with slightly lower fees than comparable ETFs. Below are a couple of total market mutual funds to also consider.

Fidelity Total Market Index Fund (FSKAX)

This fund’s objective is to generate a return that corresponds to the total return on a broad range of U.S. stocks, and it typically has about 80 percent of its assets invested in stocks included in the Dow Jones U.S. Total Stock Market Index.

Year-to-date performance: 17.3 percent
Historical performance (5-year annual): 10.8 percent
Expense ratio: 0.015 percent

Wilshire 5000 Index Investment Fund (WFIVX)

This fund seeks to replicate the total return of the Wilshire 5000 Total Market Index, which includes 3,500 stocks and is market-cap weighted.

Year-to-date performance: 16.5 percent
Historical performance (5-year annual): 10.5 percent
Expense ratio: 0.58 percent

* Note: Mutual fund performance data as of July 12, 2023

Total stock market index funds FAQs

  • There are several benefits of investing in total market index funds, but there are also some negatives to keep in mind. Here are the pros and cons to consider:

    Pros of total market index funds

    • Diversification: Through one security, you’re able to have a broadly diversified portfolio across market caps and investment styles.
    • Low fees: These funds are relatively easy to find with very low expense ratios, meaning you’ll likely pay just a few dollars for every $10,000 you have invested.
    • Very little research needed: Because these funds seek to match the performance of the entire stock market, you won’t need to spend time researching which sectors or companies are likely to outperform.
    • Earn long-term equity returns: By purchasing a total market fund, you’ll be able to achieve that region’s long-term stock market return as long as you’re able to stay invested.
    • Quickly add geographic exposure: These funds are also a great way to add a new geography to your portfolio quickly and without much effort.

    Cons of total market index funds

    • Growth is limited: Your returns are limited to the overall stock market and aren’t likely to vary much by picking different total market funds.
    • Downside of broad diversification: Because these funds are invested so broadly, you’ll miss out on outsized gains when a particular segment of the market does well. If small-caps outperform in a major way, a total market fund is likely to lag.
    • Hard to stay disciplined: Investing in total market index funds can be a bit boring, even if it is a very sensible way to invest. Boring strategies can sometimes be difficult to stick to especially when other areas are performing better.
  • Total market index funds can be a great choice for both new and experienced investors. They’re one of the easiest ways to gain broad stock market exposure at a low cost. You don’t need to be a financial expert to buy and hold the fund’s shares, making them a great choice for investors saving for long-term goals like retirement. Remember to check the fund’s expense ratio to make sure you’re paying the lowest fees possible.

  • The Vanguard total stock market index fund admiral shares are popular because it allows investors to gain exposure to the entire U.S. stock market at a low cost. Vanguard has a reputation for doing what’s best for investors and its admiral shares keep costs low while requiring lower investment minimums than other share classes. To invest in an index fund’s admiral shares you must maintain an investment of $3,000 in the fund, where you’ll pay just 4 basis points, or 0.04 percent, in annual fees. That means for every $10,000 you have in the fund, you’ll pay $4 in expenses.

Bottom line

Total market index funds are a great way for investors to access a broadly diversified portfolio of stocks at a very low cost. Index funds in general have been found to outperform actively managed funds in part due to their low fees. Consider making a total market mutual fund or ETF a core part of your long-term investment plan.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

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Total Market Index Funds

Total market index funds are a type of mutual fund or exchange-traded fund (ETF) that track an index focused on the entire stock market of a country or region. These funds aim to provide investors with exposure to a diversified portfolio of stocks across different market capitalizations, including large-cap, mid-cap, and small-cap companies. By investing in a total market index fund, investors can earn the return of the overall stock market without needing to select individual companies to invest in.

Benefits of Total Market Index Funds

Total market index funds offer several advantages for investors:

1. Diversification: Total market index funds provide broad diversification across market caps and investment styles. By investing in one security, investors can have exposure to a wide range of companies, reducing the risk associated with investing in individual stocks.

2. Low Fees: Total market index funds typically have low expense ratios, which are the fees charged by the fund for managing the investments. These low fees make total market index funds cost-effective compared to actively managed funds.

3. Minimal Research Required: Since total market index funds aim to match the performance of the entire stock market, investors do not need to spend time researching individual sectors or companies. This makes total market index funds a convenient option for investors who prefer a passive investment approach.

4. Long-Term Equity Returns: By investing in a total market fund, investors can potentially achieve the long-term returns of the stock market. Staying invested in the fund over the long term allows investors to benefit from the growth of the overall market.

5. Geographic Exposure: Total market index funds can also be used to quickly add exposure to a new geography in an investor's portfolio without much effort.

Considerations of Total Market Index Funds

While total market index funds have many benefits, there are a few considerations to keep in mind:

1. Limited Growth Potential: Returns from total market index funds are tied to the overall stock market and may not vary significantly between different total market funds. This means that investors may miss out on potentially higher returns from specific market segments that outperform the overall market.

2. Downside of Broad Diversification: Since total market index funds are broadly diversified, investors may miss out on significant gains when a particular segment of the market performs exceptionally well. For example, if small-cap stocks outperform, a total market fund may not capture the full extent of those gains.

3. Discipline Required: Investing in total market index funds can be considered a more passive and less exciting strategy compared to actively managing a portfolio. It may require discipline to stick to the investment plan, especially during periods when other investment areas are performing better.

Top-Performing Total Market Index Funds

The article mentions several top-performing total market index funds, both in ETF and mutual fund form. Here are a few examples:

  1. Vanguard Total Stock Market ETF (VTI): This ETF seeks to track the performance of the CRSP U.S. Total Market Index and invests in large-, mid-, and small-cap companies across the value and growth styles.

  2. Schwab U.S. Broad Market ETF (SCHB): This fund aims to track the total return of the Dow Jones U.S. Broad Stock Market Index, which includes companies across the market-cap spectrum.

  3. iShares Core S&P Total U.S. Stock Market ETF (ITOT): This fund seeks to track the performance of the S&P Total Market Index and holds over 3,300 securities.

  4. Fidelity Total Market Index Fund (FSKAX): This mutual fund aims to generate a return that corresponds to the total return on a broad range of U.S. stocks, with about 80% of its assets invested in stocks included in the Dow Jones U.S. Total Stock Market Index.

  5. Wilshire 5000 Index Investment Fund (WFIVX): This mutual fund seeks to replicate the total return of the Wilshire 5000 Total Market Index, which includes 3,500 stocks and is market-cap weighted.

Please note that the performance data mentioned in the article may not be up to date, so it's always a good idea to check the latest figures and do your own research before making any investment decisions.

Total market index funds can be a suitable choice for both new and experienced investors looking for broad stock market exposure at a low cost. They offer diversification, low fees, and the potential to earn long-term equity returns. However, it's important to consider the limitations of these funds, such as limited growth potential and the need for discipline in sticking to the investment strategy.

Remember to consult with a financial advisor or conduct your own research before making any investment decisions.

Best Total Stock Market Index Funds | Bankrate (2024)

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