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The Wilshire 5000 tracks every actively traded US equity, offering an appealing buy-the-market opportunity for investors seeking portfolio diversification. But not many funds track this index, so investment opportunities are limited.
The Wilshire 5000, also called the Wilshire 5000 Total Market Index (TMWX), is an index that tracks all US equities actively traded on the American Stock Exchange. This broad-based market index was named for its nearly 5,000 stocks when first launched in 1974 — but the index hasn’t held more than 5,000 companies since 2005. As of 2019, the index held 3,492 stocks.
To be included in the Wilshire 5000, a stock must meet three criteria:
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Unlike other indexes that only capture a slice of the market, the Wilshire 5000 aims to track the entire US stock market. It covers a generous selection of stock market sectors and offers market exposure through stocks and exchange-traded funds (ETFs). Investors can purchase ETFs that track the full index or invest in individual stocks within the index.
Here’s a snapshot of the process:
It tracks the biggest publicly traded companies in the US, including:
Major funds that track the Wilshire 5000 include:
The graph below tracks how the Wilshire 5000 has performed historically. Toggle between the options on the graph to see the data for the past month, three months, year or five years.
The Wilshire 5000 acts as a barometer for US markets. Investing in a comprehensive index fund provides instant portfolio diversification for an investor with limited market exposure.
Broad indexes like the Wilshire offer investors the opportunity to “buy the market” — you’re getting a small slice of every tradable security on the American Stock Exchange. This type of diversification can help your portfolio weather the natural highs and lows that impact individual industries.
The Wilshire 5000 suffers from the same flaw as the Russell 3000: it overweights large-cap stocks. As a result, the index is largely dominated by the biggest companies it tracks.
To build a balanced portfolio, consider investing in indexes that specifically target small-cap stocks, like the Russell 2000.
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The Wilshire 5000 is among the broadest and most comprehensive index to track the US market. Invest by purchasing individual stocks or funds that track the index. But remember that the Wilshire 5000 is heavily impacted by large-cap stocks, so if you’re interested in investing in smaller businesses, consider building out your portfolio with funds that track targeted subsections of the market.
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