These days almost every investor is familiar with index funds. These incredible tools put the wealth creating power of companies all around the world right at your fingertips. Even better, they do so in low cost, well-diversified, and tax-efficient vehicles that are accessible to nearly every investor.
The term “index fund,” however, is very generic. In it of itself, it doesn’t tell us as investors very much. There are literally hundreds of different indexes that a fund company can choose from when designing an index fund. Even within a given asset class (e.g. US large cap stocks), the choices can be confusing.
With that in mind, I designed the index fund comparison infographic below to help showcase the key differences between the indexes used in some of the most popular index funds available today.
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Index funds and ETFs made up 35% of stock and 17% of bond open-end funds by the end of 2013.
In terms of total dollars invested, index funds represented 14% of the stock market and 3% of the bond market.
Many investors assume that all index funds are the same. For example, a common misconception is that all index mutual funds or ETFs track the S&P 500 index.
In reality, there are literally hundreds of different indexes available that track a wide range of stock, bond, and other asset classes. Fund companies may track one or many different indexes.
Below, we compare U.S. large cap, mid cap, and small cap stock indexes from three major index providers: S&P Dow Jones, Russell, and CRSP.
Often, there are significant differences between indexes:
- Number of stocks in the index
- The breadth of the index relative to the entire U.S. stock market
- The depth of the index in terms of market cap
- How often the index is reconstituted or rebalanced
- Which fund families license an index making it available to investors
U.S. Large Cap Stocks
S&P 500 Index
– Market Cap of:
- Largest Company: $560.4 Billion
- Median Company: $18.1 Billion
- Smallest Company: $3.8 Billion
– Approximate Coverage of Total U.S. Market Cap: 80%
– Reconstitution: Quarterly
– Number of Stocks: 501
– Top 10 Constituents
- Apple Inc
- Exxon Mobil Corp
- Microsoft Corp
- Johnson & Johnson
- General Electric Co
- Wells Fargo & Co
- Chevron Corp
- Berkshire Hathaway Inc
- JPMorgan Chase & Co
- Procter & Gamble Co
– Major Fund Families Using this Index
- Vanguard
- iShares
- SPDR
Russell 1000 Index
– Market Cap of:
- Largest Company: $560.4 Billion
- Median Company: $7.6 Billion
- Smallest Company: $2.2 Billion*
– Approximate Coverage of Total U.S. Market Cap: 92%
– Reconstitution: Annually
– Number of Stocks: 1,026
– Top 10 Constituents
- Apple Inc
- Exxon Mobil Corp
- Microsoft Corp
- Johnson & Johnson
- General Electric Co
- Wells Fargo & Co
- Chevron Corp
- Berkshire Hathaway Inc
- JPMorgan Chase & Co
- Procter & Gamble Co
– Major Fund Families Using this Index
- Vanguard
- iShares
- SPDR
CRSP U.S. Large Cap Index
– Market Cap of:
- Largest Company: $560.4 Billion
- Median Company: $12.8 Billion
- Smallest Company: $753 Million
– Approximate Coverage of Total U.S. Market Cap: 85%
– Reconstitution: Quarterly
– Number of Stocks: 654
– Top 10 Constituents
- Apple Inc
- Exxon Mobil Corp
- Google Inc Class A
- Microsoft Corp
- Johnson & Johnson
- Wells Fargo & Co
- General Electric Co
- Chevron Corp
- Berkshire Hathaway Inc
- JPMorgan Chase & Co
– Major Fund Families Using this Index
- Vanguard
U.S. Mid Cap Stocks
S&P MidCap 400 Index
– Market Cap of:
- Largest Company: $11.4 Billion
- Median Company: $3.9 Billion
- Smallest Company: $1.3 Billion
– Approximate Coverage of Total U.S. Market Cap: 7%
– Reconstitution: Quarterly
– Number of Stocks: 400
– Top 10 Constituents
- Affiliated Managers Grp
- Equinix Inc
- SL Green Realty Corp
- United Rentals Inc
- Schein Henry Inc
- Advance Auto Parts Inc
- Realty Income Corp
- Endo International plc
- Hanesbrands Inc
- Trimble Navigation Ltd
– Major Fund Families Using this Index
- Vanguard
- iShares
- SPDR
Russell Midcap Index
– Market Cap of:
- Largest Company: $29.9 Billion
- Median Company: $6.3 Billion
- Smallest Company: $2.2 Billion*
– Approximate Coverage of Total U.S. Market Cap: 28%
– Reconstitution: Annually
– Number of Stocks: 832
– Top 10 Constituents
- Noble Energy Inc
- Applied Materials Inc
- AON Plc
- NetFlix Inc
- Sempra Energy
- Kroger Co
- Crown Castle International Corp
- Cigna Corp
- Forest Laboratories Inc
- SanDisk Corp
– Major Fund Families Using this Index
- iShares
CRSP U.S. Mid Cap Index
– Market Cap of:
- Largest Company: $22.4 Billion
- Median Company: $8.3 Billion
- Smallest Company: $753 Million
– Approximate Coverage of Total U.S. Market Cap: 15%
– Reconstitution: Quarterly
– Number of Stocks: 369
– Top 10 Constituents
- Vertex Pharmaceuticals
- Delphi Automotive
- Western Digital Corp
- Mylan Inc
- Health Care REIT Inc
- Moodys Corp
- Southwest Airlines Co
- Avalonbay Cmntys Inc
- Chipotle Mexican Grill
- Seagate Technology
– Major Fund Families Using this Index
- Vanguard
U.S. Small Cap Stocks
S&P SmallCap 600 Index
– Market Cap of:
- Largest Company: $5.6 Billion
- Median Company: $1.1 Billion
- Smallest Company: $156 Million
– Approximate Coverage of Total U.S. Market Cap: 3%
– Reconstitution: Quarterly
– Number of Stocks: 600
– Top 10 Constituents
- Questcor Pharmaceuticals
- Centene Corp
- LaSalle Hotel Properties SBI
- Teledyne Technologies Inc
- Toro Co
- Darling Ingredients Inc
- Belden Inc
- Tanger Factory Outlet Centers
- Synaptics Inc
- Moog Inc A
– Major Fund Families Using this Index
- Vanguard
- iShares
- SPDR
Russell 2000 Index
– Market Cap of:
- Largest Company: $4.5 Billion
- Median Company: $751 Million
- Smallest Company: $169 Million*
– Approximate Coverage of Total U.S. Market Cap: 9%
– Reconstitution: Annually
– Number of Stocks: 1,975
– Top 10 Constituents
- InterMune Inc
- Prosperity Bancshares Inc
- Aspen Technology Inc
- WEX Inc
- Isis Pharmaceuticals Inc
- Tenneco Inc
- PolyOne Corp
- Investors Bancorp Inc
- Ultimate Software Group Inc
- Brunswick Corp
– Major Fund Families Using this Index
- Vanguard
- iShares
- SPDR
CRSP U.S. Small Cap Index
– Market Cap of:
- Largest Company: $7.6 Billion
- Median Company: $1.5 Billion
- Smallest Company: $16 Million
– Approximate Coverage of Total U.S. Market Cap: 13%
– Reconstitution: Quarterly
– Number of Stocks: 1,449
– Top 10 Constituents
- Hillshire Brands Co
- Salix Pharmaceutical
- Foot Locker Inc
- Arthur J Gallagher & Com
- Harma Intl Inds Inc
- Alkermes Plc
- Gannett Inc
- Packaging Corp Amer
- Rite Aid Corp
- Snap On Inc
– Major Fund Families Using this Index
- Vanguard
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Data as of June 30, 2014, except where noted.
* Data as of May 31, 2014
Sources:
S&P Dow Jones Indices LLC, a part of McGraw Hill Financial
Russell Investments
Center for Research in Security Prices at Chicago Booth
The Vanguard Group, Inc.
Disclosures
For important disclosures regarding this and all other material published by Wealth Engineers, please visit: wealthengineersllc.com/disclosures
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