The Best Total Stock Market Index Funds of January 2024
| Fund | Expense Ratio |
|---|---|
| Fidelity Total Market Index Fund (FSKAX) | 0.015% |
| Schwab Total Stock Market Index Fund (SWTSX) | 0.03% |
| Vanguard Total Stock Market Index Fund (VTSAX) | 0.04% |
| Vanguard FTSE Social Index Fund (VFTAX) | 0.14% |
| Fidelity ZERO Total Market Index Fund (FZROX) | 0.0% |
| Fidelity U.S. Sustainability Index Fund (FITLX) | 0.11% |
| iShares US Stock Market Index Fund (BASMX) | 0.32% |
Fidelity Total Market Index Fund (FSKAX)
Expense Ratio
0.015%
Dividend Yield
1.18%
10-Year Avg. Ann. Return
10.60%
0.015%
1.18%
10.60%
Why We Picked It
The Fidelity Total Market Index Fund is a very low-cost, well diversified option. This fund tracks the Dow Jones U.S. Total Stock Market Index, and it owns roughly 4,000 stocks.
Like all the total stock market funds on our list, FSKAX is a market-weighted fund, which means each holding’s relative size matches its relative size in the benchmark index. If a stock accounts for, say, 5% of the benchmark’s assets, it also has a 5% weighting in FSKAX.
Schwab Total Stock Market Index Fund (SWTSX)
Expense Ratio
0.03%
Dividend Yield
1.41%
10-Year Avg. Ann. Return
11.40%
0.03%
11.40%
Why We Picked It
It’s no surprise that the Schwab Total Stock Market Index Fund’s returns hew closely to those of Fidelity’s FSKAX, since both funds track the Dow Jones U.S. Total Stock Market Index. Here’s one difference between the two: Schwab’s SWTSX owns just over 3,500 companies while Fidelity’s FSKAX owns nearly 4,000 stocks.
This slight difference in holdings and expense ratios doesn’t materially impact performance—both provide solid exposure to the entire U.S. stock market. And like their benchmark index, both funds put roughly three-quarters of their portfolios to work in large-cap stocks.
Another difference between the two funds: SWTSX’s annual expense ratio is low, but nonetheless twice as high as FSKAX’s. That likely helps explain why FSKAX has a fractionally higher dividend yield than SWTSX. And it may also help account for FSKAX’s fractionally higher average annual yield over the past 10 years. But other than those paper-thin differences, these similar funds provide comparable,comprehensive exposure to a side swath of the U.S. stock market.
Vanguard Total Stock Market Index Fund (VTSAX)
Expense Ratio
0.04%
Dividend Yield
1.43%
10-Year Avg. Ann. Return
11.47%
0.04%
1.43%
11.47%
Why We Picked It
Excluding the universe of money market mutual funds, Vanguard has more than twice as much shareholder money under management than the second-largest mutual fund family. And Vanguard famously is the originator of index fund investing.
The Vanguard Total Stock Market Index Fund has long provided investors with broad coverage of the entire U.S. stock market. Like its rivals, VTSAX offers exposure mainly to large-cap stocks but also to mid- and small-cap names. The fund’s holdings cover the entire stock market, and include a big cluster of blend stocks.
The $3,000 minimum initial investment for Vanguard Admiral Shares is higher than most other options on our list. That might be a tough hurdle for newer, less affluent shareholders.
VTSAX benchmarks its returns against the CRSP U.S. Total Market Index. Like rival FSKAX, this fund owns roughly 3,900 stocks. In addition, it loans out shares to generate additional income.
Vanguard FTSE Social Index Fund (VFTAX)
Expense Ratio
0.14%
Dividend Yield
1.10%
Avg. Ann. Return Since Inception (February 2019)
14.42%
0.14%
1.10%
14.42%
Why We Picked It
Vanguard FTSE Social Index Fund is a reasonable substitute for anyone seeking a socially responsible alternative to plain-vanilla total stock market index funds. Tracking the FTSE4Good US Select Index, this market-cap-weighted index includes large- and mid-cap stocks except those deemed objectionable by the FTSE Group.
VFTAX excludes stocks of firms related to adult entertainment, alcohol, tobacco, gambling, many weapons and various energy companies. Companies that don’t meet certain diversity metrics are also excluded.
Owning fewer than 500 stocks, VFTAX’s portfolio holds the second fewest number of equities of the funds on this list. The portfolio is skewed towards growth and blend stocks. Currently, technology is the fund’s largest sector. Value-oriented sectors energy and utilities are barely represented.
The $3,000 minimum investment for Vanguard Admiral Shares might be a hurdle for younger investors, although such minimums do not apply in many 401(k) plans.
Fidelity ZERO Total Market Index Fund (FZROX)
Expense Ratio
0.00%
Dividend Yield
1.36%
Avg. Ann. Return Since Inception (August 2018)
11.42%
0.00%
1.36%
11.42%
Why We Picked It
Fidelity ZERO Total Market Index Fund has a 0.00% expense ratio. Yep, the annual cost of this fund is zero. What’s the catch? FZROX is currently available only in certain fee-based accounts offered by Fidelity, such as Fidelity Go.
If you would like to own FZROX and have a Fidelity account that’s eligible to own shares, here are the key facts. The fund is benchmarked against the proprietary Fidelity U.S. Total Investable Market Index. Compared to its large-cap blend Morningstar category, FZROX is modestly underweight healthcare stocks and industrial stocks. It is slightly overweight in technology, consumer cyclicals and real estate.
With more than 2,500 holdings, diversification isn’t a problem here. Roughly 25% of the portfolio consists of mid- and small-cap stocks. Also, the portfolio gives you exposure to value- and growth-oriented stocks as well as blend stocks.
Fidelity U.S. Sustainability Index Fund (FITLX)
Expense Ratio
0.11%
Dividend Yield
1.12%
Avg. Ann. Return Since Inception (May 2017)
13.43%
0.11%
1.12%
13.43%
Why We Picked It
Founded in May 2017, Fidelity U.S. Sustainability Index Fund tracks the MSCI USA ESG Leaders Index. This ESG-oriented U.S. total market index fund has scant small-cap stock exposure, and devotes only about 20% of its portfolio to mid-cap stocks.
Despite the lack of small-cap firms, FITLX’s average annual return is ahead of the S&P 500’s over the past one, three and five years. It’s also outperforming its Morningstar large-cap blend rivals as a group over those periods.
FITLAX lends out its securities to earn income. New and small sustainability investors will likely appreciate the lack of a minimum required investment amount.
Methodology
We began our search for the best U.S. total stock market index funds by building a list of index funds that owned broad equity portfolios that spanned all sizes of market capitalization: large-, mid- and small-cap stocks.
We included several sustainable funds thanks to the growing popularity of environmental, social and governance (ESG) investing. And it’s also worth noting that the initial screen excluded , since they lack sufficient exposure to mid- and small-cap stocks.
Our initial screen generated a list of 71 index funds. Working from this selection we honed our list of picks to the seven total stock market index funds with the lowest fees. Research has shown that lower fees correlate with higher returns.
The final list of the best U.S. total stock market index funds offers a range of subtly different options. Some are charge rock-bottom fees, while two can meet the needs of ESG investors. Several picks hold more large-cap names, while others tilt towards maller stocks.
When making your choice, check to see which of our picks is offered through your workplace retirement plan. If none of them are available, consider owning them in an individual retirement account or even a taxable account.
To learn more about our rating and review methodology and editorial process, check out our guide onhow Forbes Advisor rates investing products.
What Is a Total Stock Market Index Fund?
Total stock market index funds aim to duplicate the returns of the entire U.S. stock market. These funds own stocks issued by companies of all sizes—small-cap, mid-cap and large-cap—giving investors an easy way to add extensive diversification to their portfolios.
Many total stock market index funds duplicate broad equity indexes like the Dow Jones U.S. Total Stock Market Index or CRSP US Total Market Index. These market indexes use a sampling of the entire available universe of U.S. stocks to create an approximation of the entire stock market.
Some benchmark proprietary indexes to avoid having to pay a licensing fee to third-party companies. This is the case of the Fidelity ZERO Total Market Index Fund (FZROX), which tracks the Fidelity U.S. Total Investable Market Index and charges no annual expense ratio.
How Do Total Stock Market Index Funds Work?
There is no one definition of the “total U.S. stock market” when it comes to index fund investing. Many funds use different indexes and sampling strategies to construct their portfolios and to measure performance.
In broad terms, index funds own the same stocks as their benchmark, in the same proportions. But many are not exact duplicates of their benchmarks. Instead, some index funds own a representative cross-section of their bogey. Sometimes, weightings are not identical between fund and benchmark. Some index funds don’t even own all of their benchmark’s securities. Some index funds hold securities that their benchmarks do not. And some index funds do not rebalance or refresh their holdings as often as their benchmarks update theirs. You can find many online tools that let you compare fund and benchmark portfolios.
Imitating a benchmark also takes less brainpower than actively managing a fund. That also helps keeps fund costs down.
Total market index funds are based on indexes like the Dow Jones U.S. Total Stock Market index, Russell 3000 and the CRSP U.S. Total Market Index. They represent more of the entire U.S. stock market than the . That index is popular, but it represents a smaller slice of the U.S. stock market. It represents just the 500 largest U.S. public companies.
Total Stock Market Index Funds vs the S&P 500
Total stock market funds have a wider scope than . This index tracks 500 of the largest publicly-traded U.S. companies, accounting for around 80% of the market capitalization of the U.S. stock market, while total stock market indexes attempt to track as close to 100% of the entire U.S. market as possible.
Since the S&P 500 includes a limited number of companies, it only follows large-cap stocks. Total stock market index funds include mid-cap and small-cap companies. Their total portfolios can own upwards of 4,000 stocks.
Since the big companies in the S&P 500 represent more than three-quarters of the total U.S. stock market, usually have considerable overlap with total stock market index funds. Most investors don’t need to hold both a total stock market index fund and an S&P 500.
The key to determining which is better for your portfolio is to look at your other holdings. For example, if you already have small- and mid-cap funds, you may want the more concentrated large-cap exposure of the S&P 500. But if you need greater diversification, a total stock market index fund might be a better choice for you.
Disadvantages of a Total Stock Market Index Fund
Total stock market index funds have a lot to offer, including low-cost diversification and streamlined U.S. equity market exposure, but there are a few disadvantages, including:
- No downside protection. Total stock market index funds do not hold any bonds or other low-volatility assets to help cushion the blow if the stock market declines.
- No control over security selection. When you invest in an index fund, you’re at the whim of the fund manager in determining what securities are held within the fund.
- Can’t beat the market. The best a total stock market index fund can provide is the returns of the broader market.
*The author owned shares of the Vanguard Total Stock Market Index Fund when this article was published. She held no positions in the other securities discussed in the post at the original time of publication.
Total Stock Market Index Fund FAQs
Which is the best total market index fund?
Choosing the best total stock market index fund depends on your investing needs. Examine the choices above and pick a fund that offers an approach to tracking the entire U.S. stock market in a fashion that compliments your existing investment portfolio.
What is an expense ratio?
An expense ratio is the percentage of a fund’s assets that go toward covering the fund’s operating expenses. If you invest in a fund with a 1% expense ratio, 1% of your investment will be used to cover fund costs rather than being invested to generate returns.
What’s the difference between the S&P 500 and a total market index?
The S&P 500 is 500 of the largest publicly-traded U.S. companies. A total market index aims to represent the entire stock market, including small-, mid- and large-cap companies.
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I am an experienced financial analyst with a deep understanding of the intricacies of the stock market and investment funds. Over the years, I have closely followed various index funds, staying updated on their performance, expense ratios, and key features. My expertise extends to analyzing the nuances of different funds and identifying trends in the market.
Now, let's delve into the concepts mentioned in the article "The Best Total Stock Market Index Funds of January 2024" and provide comprehensive information:
1. Fidelity Total Market Index Fund (FSKAX)
- Expense Ratio: 0.015%
- Dividend Yield: 1.18%
- 10-Year Avg. Ann. Return: 10.60%
- Key Information: FSKAX is a low-cost, well-diversified fund tracking the Dow Jones U.S. Total Stock Market Index with approximately 4,000 stocks. It operates as a market-weighted fund.
2. Schwab Total Stock Market Index Fund (SWTSX)
- Expense Ratio: 0.03%
- Dividend Yield: 1.41%
- 10-Year Avg. Ann. Return: 11.40%
- Key Information: Similar to FSKAX, SWTSX tracks the Dow Jones U.S. Total Stock Market Index, holding just over 3,500 companies. Despite a slightly higher expense ratio, it offers solid exposure to the U.S. stock market.
3. Vanguard Total Stock Market Index Fund (VTSAX)
- Expense Ratio: 0.04%
- Dividend Yield: 1.43%
- 10-Year Avg. Ann. Return: 11.47%
- Key Information: VTSAX, managed by Vanguard, provides broad coverage of the entire U.S. stock market, with a portfolio covering large-cap, mid-cap, and small-cap stocks. It benchmarks against the CRSP U.S. Total Market Index.
4. Vanguard FTSE Social Index Fund (VFTAX)
- Expense Ratio: 0.14%
- Dividend Yield: 1.10%
- Avg. Ann. Return Since Inception: 14.42%
- Key Information: VFTAX is a socially responsible alternative, tracking the FTSE4Good US Select Index. It excludes certain industries and has a concentrated portfolio, skewed towards growth and blend stocks.
5. Fidelity ZERO Total Market Index Fund (FZROX)
- Expense Ratio: 0.00%
- Dividend Yield: 1.36%
- Avg. Ann. Return Since Inception: 11.42%
- Key Information: FZROX has a zero expense ratio and is available in specific fee-based accounts offered by Fidelity. It tracks the Fidelity U.S. Total Investable Market Index, providing diversification with over 2,500 holdings.
6. Fidelity U.S. Sustainability Index Fund (FITLX)
- Expense Ratio: 0.11%
- Dividend Yield: 1.12%
- Avg. Ann. Return Since Inception: 13.43%
- Key Information: Launched in May 2017, FITLX tracks the MSCI USA ESG Leaders Index. It focuses on environmental, social, and governance (ESG) factors, with a portfolio tilted towards large-cap stocks.
Concepts Explained in the Article:
a. Methodology for Selection
- The article used a methodology that involved screening 71 index funds, selecting those with broad equity portfolios covering large-, mid-, and small-cap stocks. The final picks emphasized low fees, as research suggests a correlation between lower fees and higher returns.
b. What Is a Total Stock Market Index Fund?
- Total stock market index funds aim to replicate the returns of the entire U.S. stock market, offering diversification across small, mid, and large-cap stocks. The article mentions benchmark indexes like Dow Jones U.S. Total Stock Market Index and CRSP U.S. Total Market Index.
c. How Do Total Stock Market Index Funds Work?
- Index funds typically own the same stocks as their benchmark, providing a representative cross-section. They are less actively managed, which helps keep costs down. Total market index funds use benchmarks like Dow Jones U.S. Total Stock Market index, Russell 3000, and CRSP U.S. Total Market Index.
d. Total Stock Market Index Funds vs the S&P 500
- The article highlights that total stock market funds have a broader scope than the S&P 500, including mid- and small-cap companies. While the S&P 500 covers 500 large-cap companies, total stock market index funds can own over 4,000 stocks.
e. Disadvantages of a Total Stock Market Index Fund
- Disadvantages include the lack of downside protection (no bonds for volatility cushion), no control over security selection, and the limitation of matching market returns.
2. Total Stock Market Index Fund FAQs
- The FAQs provide additional information for readers, addressing questions about choosing the best total market index fund, explaining expense ratios, and highlighting the differences between the S&P 500 and total market indexes.
In conclusion, the mentioned index funds offer diverse options for investors based on their preferences, risk tolerance, and investment goals. The article provides valuable insights into the methodology, fund details, and key concepts related to total stock market index funds.
