Total Stock Market Index Funds Explained
One fund, the entire U.S. stock market — large, mid, and small-cap. Here's how a total-market index fund differs from the S&P 500 and why some investors prefer it.
Don't have time? Here's what you need to know:
- 1A total-market index fund holds several thousand U.S. companies — large, mid, and small — versus ~500 in the S&P 500.
- 2VTI, VTSAX, FSKAX and SWTSX all track the total U.S. market at roughly 0.03%; VTI and VTSAX are ETF and mutual-fund versions of the same thing.
- 3Because both are cap-weighted, a total-market fund and an S&P 500 fund have tracked each other within about a percentage point a year.
- 4VTI plus VXUS plus BND forms the classic three-fund portfolio covering U.S., international, and bonds.
One Fund, the Entire U.S. Stock Market
A total stock market index fund aims to hold essentially every investable U.S. company — large, mid, and small-cap — in a single fund. Where an S&P 500 fund stops at about 500 large companies, a total-market fund typically holds several thousand names, capturing the small and mid-sized firms the S&P 500 leaves out. The best-known options are Vanguard's VTI ETF and its mutual-fund twin VTSAX, plus Fidelity's FSKAX and Schwab's SWTSX.
In practice these funds are still dominated by their largest holdings, because they are capitalization-weighted just like the S&P 500. The thousands of small-cap names at the bottom each carry a tiny weight, so a total-market fund behaves much like an S&P 500 fund day to day. The difference is at the margins: you also own the smaller companies, which adds a little diversification and a slightly different long-run risk-and-return profile.
Total Market vs the S&P 500: Does the Difference Matter?
Because both indexes are dominated by the same mega-cap companies, VTI and an S&P 500 fund like VOO have tracked each other closely for years, with returns usually differing by less than a percentage point annually. The extra small and mid-cap exposure in a total-market fund helps in years when smaller companies outperform and drags slightly when they lag. Over the long run the two have produced broadly similar results.
So which should you hold? If you want the simplest single-fund U.S. equity holding, a total-market fund is arguably the more complete choice — it owns the whole market by definition, with nothing to add later. If your 401(k) only offers an S&P 500 fund, that is perfectly fine too. The decision is genuinely minor; both are excellent low-cost cores, and you should not agonize over it.
| Total market (VTI/VTSAX) | S&P 500 (VOO/VFIAX) | |
|---|---|---|
| Holdings | Several thousand stocks | ~500 stocks |
| Size range | Large + mid + small-cap | Large-cap only |
| Weighting | Cap-weighted | Cap-weighted |
| Expense ratio | ~0.03% | ~0.03% |
| Behaves like | The whole U.S. market | Large U.S. companies |
Tip: Don't hold both a total-market fund and an S&P 500 fund expecting extra diversification. They overlap almost entirely — you'd just be duplicating your largest holdings.
The Real Funds and What They Cost
The major total-market funds are nearly indistinguishable on cost and what they track. VTI and VTSAX track Vanguard's total-market index; FSKAX follows Fidelity's; SWTSX follows Schwab's. All charge roughly 0.03% or less, and all hold a sweeping cross-section of U.S. companies. As with S&P 500 funds, the sensible move is usually to buy your own brokerage's in-house version to avoid any transaction friction.
VTI deserves a special mention because it is one of the most popular building blocks in DIY portfolios. Pair it with an international fund like VXUS and a bond fund like BND and you have the classic three-fund portfolio — total U.S. market, total international market, and total bond market — covering nearly everything an ordinary investor needs in three cheap funds.
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Who a Total-Market Fund Suits
A total-market fund is a natural fit for the investor who wants maximum simplicity: one ticker that owns the entire domestic stock market and never needs rebalancing among U.S. size segments. It is especially appealing in a Roth IRA or taxable brokerage account where you control the menu and can pick exactly the fund you want. For hands-off investors, it removes one more decision.
It is not a complete portfolio on its own — like the S&P 500, it holds no international stocks and no bonds. But as the U.S. equity portion of a diversified plan, a total-market index fund is hard to improve on. It is broad, cheap, tax-efficient, and requires essentially no maintenance, which is exactly what most long-term investors should want from their core holding.
Frequently Asked Questions
Should I buy a total stock market fund or an S&P 500 fund?
Either is a strong core holding, and the difference is small because both are dominated by the same large companies. A total-market fund (VTI, VTSAX) also owns mid- and small-caps, making it slightly more complete as a single U.S. equity holding. An S&P 500 fund (VOO, VFIAX) is large-cap only. If you can choose freely, total market is the marginally more diversified pick; if your plan only offers the S&P 500, that's fine too.
Do VTI and VOO overlap?
Heavily. VTI's largest holdings are the same mega-cap companies that make up most of VOO, so the two move almost in lockstep. VTI simply adds thousands of smaller companies at tiny weights. Holding both gives you almost no extra diversification — you'd essentially be doubling up on your biggest positions.
What's the difference between VTI and VTSAX?
Nothing in what they own — both track Vanguard's total U.S. stock market index. VTI is the ETF version; VTSAX is the mutual fund version. Choose VTI for intraday trading and fractional shares, or VTSAX if you prefer automatic dollar-amount investing directly with Vanguard. Their costs and holdings are effectively identical.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.