Understanding the Wilshire 5000 Index – Forbes Advisor


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When market analysts talk about the stock market, they always refer to the Nasdaq, the Dow Jones, and the S&P 500. While these three indexes are the most common surrogates for the entire stock market, there is one more option that is suitable. really: the Wilshire 5000.

What is the Wilshire 5000?

The Wilshire 5000 is an index that tracks the performance of the entire US stock market. Unlike other market proxies which can hold as few as 30 stocks, the Wilshire 5000 holds thousands of them at any given time in an attempt to genuinely replicate the entire market.

That means it’s a huge clue. In fact, its total market value was $ 46 trillion at the end of September 2021. That’s nearly $ 8 trillion more than the S&P 500, which tracks about a tenth of companies.

Wilshire maintains three different versions of the index, each of which is weighted slightly differently:

  • Total market capitalization: With the full market capitalization model, companies are weighted based on their market capitalization or the total value of their outstanding shares.
  • Free float-adjusted market capitalization: Free float-adjusted market capitalization uses the market capitalization of companies but only counts stocks available for purchase in the open market.
  • Equal weight: With an equal weighting index, the index invests an equal amount in each security. Every company has the same level of importance and impact on the performance of the index, regardless of its size.

Wilshire 5000 Companies

Despite its name, the Wilshire 5000 does not track 5,000 stocks. The actual number of titles it tracks changes over time. Since the inception of the Wilshire 5000 Index, the number of index members has fluctuated. For example, there were over 7,500 companies in the index in 1998. Today that number has fallen to around 3,500. The composition of the index is reviewed and adjusted monthly.

To be included in the Wilshire 5000, companies must be publicly traded and be headquartered in the United States. As the index aims to replicate the economy as a whole, the companies included in the index can vary in size and market capitalization and belong to any sector.

For example, Apple, the largest company in the index, has a market capitalization of $ 2.117 billion. In contrast, Westell Technologies, one of the smaller companies in the index, has a market cap of just $ 8 million.

As of September 27, 2021, the largest companies in the Wilshire 5000 index (as a percentage of their net assets occupied to the index total) are:

You can view the full list of Wilshire 5000 members on the Wilshire website.

Wilshire 5000 vs. other market indices

While the Wilshire 5000 is the most comprehensive of the market indices, there are several other indices to consider when valuing the market:

S&P 500

Unlike the Wilshire 5000, the S&P 500 has a relatively narrow range. It tracks the stock prices of 500 of the largest public companies in the United States. To be included in the S&P 500, companies must have shares outstanding worth more than $ 10 billion.

Nasdaq 100

The Nasdaq 100 only measures 100 companies listed on the Nasdaq stock exchange. Unlike the Wilshire 5000, it includes both domestic and international companies, but it does not include financial organizations.

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) is the narrowest of the indices, tracking just 30 stocks. It measures the performance of blue chip stocks, that is, large companies that have historically performed well and demonstrated growth.

Russel 3000

The Russell 3000 measures the performance of 3,000 of the largest US stocks and gives exposure to the entire stock market. It is the most similar to the Wilshire 5000 of the indexes listed.

Wilshire 5000 Returns Against Major Market Indices

How to invest in the Wilshire 5000

While you can invest in individual stocks in the index, diversifying your portfolio to the Wilshire 5000 can be overwhelming and expensive. You will have to buy thousands of stocks, and managing and rebalancing your portfolio yourself would be extremely difficult.

Another option is to invest in index funds, one-stop-shop investment vehicles that aim to mimic the performance of a particular index. That said, Wilshire 5000 index funds are less common than funds that track other indices, in part because of the massive scale of the index and the lower liquidity of the smaller companies in the index, according to etf. com. You may also experience a bit more volatility with a Wilshire 5000 fund, given the amount of small and mid cap stocks it has.

Funds that track the index, parts of it, or similar total market indices include:

  • Schwab Total Stock Index (SWTSX)
  • Wilshire 5000 Index Fund (WINDX)
  • Investment Class Shares of the Wilshire 5000 Index Portfolio (WFIVX)
  • Vanguard Total Stock Market ETF (VTI)

Should you invest in the Wilshire 5000?

If you are looking to invest in the broader stock market, it can be difficult to find a more comprehensive all-in-one investment than a Wilshire 5000 index fund. But keep a few things in mind:

Watch out for expense ratios. While index funds charge lower fees overall, less common indices, like the Wilshire 5000, tend to have higher costs than what you might find with an S&P 500 fund. And their size does not guarantee superior returns. that might justify these higher fees.

You may not get as much exposure to small and mid cap companies as you want. Even with a fund that tracks the entire stock market, your investment will likely be very heavily biased towards large companies. Remember: the S&P 500 owns around 80% of the market cap of the Wilshire 5000. This means that these companies will represent the vast majority of the latter in a market cap weighted index fund. If you want exposure to small and mid caps, you may be better served by index funds specifically tailored to them.

If you’re not sure which investments are right for you, consider speaking with a financial advisor to discuss your needs and develop a personalized investment plan.

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