If you’ve ever looked at your 401(k) and wondered why you aren't actually "owning the whole market" despite buying an S&P 500 fund, you've stumbled onto a massive blind spot. Most people think the S&P 500 is the stock market. It isn't. It’s just the big guys. To get the rest, you need to look at the Dow Jones U.S. Completion TSM Index.
It’s a mouthful. Honestly, the name sounds like something dreamed up in a windowless basement by guys who wear transition lenses and eat lukewarm salad. But beneath the boring branding, this index is actually the engine room of the American economy. It represents everything in the U.S. stock market except the S&P 500.
Think of it as the "everything else" fund. It’s the mid-caps. The small-caps. The scrappy micro-caps that haven't quite made it to the big leagues yet. If the S&P 500 is the varsity team, the Dow Jones U.S. Completion TSM Index is the massive, talented pool of players waiting for their shot at the pros.
✨ Don't miss: Home Equity Line of Credit Huntington: What Most People Get Wrong
Why this index is the missing piece of your portfolio
Most investors suffer from a weird kind of home-bias toward mega-cap tech. We all love Apple and Microsoft. But when you only hold those, you're missing out on the jagged, volatile, but often rewarding growth of smaller companies. The Dow Jones U.S. Completion TSM Index is designed specifically to fill that gap. It’s a sub-index of the Dow Jones U.S. Total Stock Market Index. Basically, it takes that total market universe and chops off the top 500 companies.
What's left? About 3,000 or so stocks.
It’s a float-adjusted market capitalization-weighted index. That’s just a fancy way of saying that the bigger the "small" company is, the more weight it has in the index. But because it lacks the trillion-dollar giants, the weight is distributed across sectors you might be ignoring. You get way more exposure to industrials, regional banks, and specialized healthcare firms.
You’ve probably seen this index referenced if you use Vanguard or Fidelity. For instance, the Vanguard Extended Market Index Fund (VEXAX) tracks an index that is functionally almost identical to this one. It's for people who want to "complete" their exposure so they aren't just betting on the 500 largest companies in the country.
The volatility trap and the small-cap premium
Let's be real for a second. Small caps have had a rough few years. With interest rates staying higher than we’d like, smaller companies that rely on debt have felt the squeeze. If you look at the performance of the Dow Jones U.S. Completion TSM Index compared to the S&P 500 over the last decade, the big guys have mostly crushed it.
But history is a long game.
✨ Don't miss: DoorDash Driver App: What Most People Get Wrong About Dashing
There is a concept in finance called the "size factor" or the small-cap premium. The idea, popularized by Fama and French, is that smaller companies should, theoretically, provide higher returns over long periods to compensate investors for taking on more risk. They’re riskier. They go bust more often. They swing wildly when the news cycle gets weird.
But when they run? They really run.
The Dow Jones U.S. Completion TSM Index captures that "running" potential. When a company is in this index, it’s often in its high-growth phase. Once it becomes a massive, stable, dividend-paying behemoth, it graduates. It gets moved into the S&P 500. By holding the completion index, you’re basically owning the "before they were famous" version of the next Nvidia or Tesla.
Sector weightings tell a different story
If you look at the S&P 500, it’s incredibly top-heavy with Information Technology. We’re talking nearly 30% or more depending on the day. The completion index is different.
- Industrials: You get way more exposure to the companies that actually build things—pumps, valves, trucking fleets.
- Financials: Not the "too big to fail" banks, but the regional players that drive local economies.
- Healthcare: Lots of biotech. This is the "lottery ticket" section of the index. One FDA approval and a tiny stock in this index can jump 400% in a morning.
It’s a more diversified slice of the actual American economy, rather than just a slice of the global corporate elite.
Tracking error and why your "total market" fund might be lying
A lot of people buy a "Total Stock Market" fund and assume they are done. That’s fine. Those funds usually hold about 80% S&P 500 and 20% of the stuff found in the Dow Jones U.S. Completion TSM Index.
But what if you want more?
If you think mid and small caps are undervalued—which many analysts currently do because their P/E ratios are significantly lower than the mega-caps—you might want to "overweight" them. You do that by buying an S&P 500 fund and then adding a completion index fund on top.
But watch out for the "completion" terminology. Some people confuse this with the Russell 2000. They aren't the same. The Russell 2000 is strictly small-cap. The Dow Jones U.S. Completion TSM Index includes mid-caps too. It covers the space between the "very small" and the "very large." It’s the middle child of the market, and honestly, the middle child usually works harder.
Is it time to buy the laggards?
There’s a lot of talk about "market breadth" lately. When only five stocks are pushing the whole market up, analysts get nervous. They call it a "thin" market. A healthy market is one where the Dow Jones U.S. Completion TSM Index is also rising. It shows that the prosperity is spreading down to the smaller players.
Kinda makes sense, right? If the small businesses are thriving, the economy is usually on solid ground.
If you’re looking at this index today, you’re looking at a valuation play. The S&P 500 is trading at high multiples. The completion index? Not so much. Many of these companies are trading at a discount compared to their historical averages. If we see a "rotation"—which is just a fancy Wall Street word for investors getting bored of expensive tech and looking for deals elsewhere—this index is where that money will flow.
Real-world constraints
You can’t just go out and "buy" an index. You have to buy a product that tracks it.
Most people use the Vanguard Extended Market ETF (VXF). It’s cheap. The expense ratio is practically zero. It tracks the S&P Completion Index, which is the direct rival to the Dow Jones version. They are so similar that for a retail investor, the difference is basically statistical noise.
The main thing to keep an eye on is the "reconstitution" period. These indices change. Companies grow and get moved out; others shrink and get dropped in. This turnover can create capital gains distributions if you hold the mutual fund version in a taxable account. Just something to keep in mind before you dump your life savings into it.
The "Completion" Strategy in Practice
If you want to actually use this information, don't just guess. Look at your current holdings. If you have $10,000 in an S&P 500 fund, you have zero exposure to the 3,000 companies in the completion index.
To mirror the actual U.S. stock market, the ratio is usually around 4:1. For every $80 you have in the S&P 500, you’d want about $20 in the Dow Jones U.S. Completion TSM Index.
💡 You might also like: AUS Dollar to PKR Explained: What Really Drives the Exchange Rate Right Now
Some people prefer a 50/50 split if they are aggressive. That’s a bold move. It means you’re betting heavily that the "underdogs" will eventually catch up to the "magnificent" tech giants. It’s a volatile ride, but for someone with a 20-year horizon, it's a strategy that has merit.
Actionable Steps for Investors
Stop treating the Dow Jones U.S. Completion TSM Index like a boring technicality. It’s a tool for precision.
First, check your overlap. Use a tool like Morningstar’s "Instant X-Ray" to see if you actually own any mid or small caps. You might be surprised to find you’re 95% concentrated in just the top 50 companies.
Second, consider the "completion" fund as a way to diversify your sector risk. If tech tanks, the completion index often holds up better because it’s heavier on old-school industries like manufacturing and logistics.
Finally, watch the interest rate environment. Small and mid-caps are sensitive to the cost of borrowing. When the Fed starts signaling a sustained downward trend in rates, the Dow Jones U.S. Completion TSM Index often begins to outperform. That’s usually the "buy" signal that savvy investors look for before the rest of the herd catches on.
What to do next
- Review your 401(k) options. Look for names like "Extended Market Index" or "Completion Index." These are your tickets to this asset class.
- Compare expense ratios. Don't pay more than 0.10% for an index fund tracking this space. Anything higher is just a fee-grab by the bank.
- Balance, don't swap. Don't sell all your S&P 500 holdings. The goal is to complete the portfolio, not to abandon the winners. A mix is almost always better than a pure bet on one end of the market cap spectrum.