You've probably heard of the S&P 500. Everyone has. It’s the celebrity of the financial world, the big shot that gets all the headlines when the market rallies or crashes. But honestly, focusing only on the 500 is like watching the first ten minutes of a movie and claiming you know the whole plot. It’s incomplete. If you want to actually see what the entire U.S. equity market is doing—every nook, cranny, and micro-cap tech startup—you need to look at the S&P Total Market Index.
It’s massive.
We are talking about a benchmark that doesn't just stop at the "blue chips" like Apple or Microsoft. It keeps going. It tracks thousands of companies. Specifically, it’s designed to be the definitive yardstick for the broad U.S. stock market, including large, mid, small, and even those tiny micro-cap stocks that the bigger indices ignore.
What exactly is the S&P Total Market Index anyway?
Basically, the S&P Total Market Index (TMI) is the parent of the S&P 500 and the S&P Completion Index. If a stock is traded on a major U.S. exchange and meets some basic liquidity requirements, it’s probably in here.
Most people think the S&P 500 is "the market." It's not. It represents about 80% of the market value. That remaining 20%? That’s where the S&P Total Market Index lives. It captures the outliers. It captures the tomorrow-makers. While the S&P 500 is weighted toward the giants, the TMI gives you a slice of everything. Because it is float-adjusted market-cap weighted, the big guys still dominate the movements, but the "tail" of the index is incredibly long.
How many stocks are we talking about? Usually over 2,500, though the number fluctuates as companies go public, merge, or delist.
Why the "Total Market" approach is actually different
You might be wondering if it even matters. If the top 500 companies make up 80% of the weight, doesn't the TMI just mimic the S&P 500?
Sorta. But not quite.
During periods where small-cap stocks outperform—like we saw in the early 2000s or during specific recovery phases—the S&P Total Market Index can provide a different return profile than the standard 500. It’s about diversification in its purest form. You aren't betting on sectors; you are betting on the entire American economy.
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Think about the "Magnificent Seven." In a standard large-cap index, those seven stocks have a massive, almost suffocating influence on your portfolio. In the S&P Total Market Index, their influence is slightly diluted by the inclusion of thousands of other businesses. It’s a tiny bit more "democratic," if you want to look at it that way.
S&P Total Market Index vs. The Russell 3000
This is where things get a little nerdy, but it's important.
If you're looking for a broad market benchmark, you've likely seen the Russell 3000. They are competitors. Both want to be the "everything" index. However, S&P Dow Jones Indices and FTSE Russell have different rulebooks.
The Russell 3000 is strictly rules-based and reconstitutes once a year in June. This "Great Reconstitution" is a massive event that can actually cause weird price swings as fund managers scramble to buy or sell stocks to match the new list. S&P, on the other hand, uses a committee-based approach for some of its indices and updates more fluidly.
The S&P Total Market Index also tends to have slightly different eligibility requirements regarding earnings and liquidity. While the Russell 3000 is the more common benchmark for institutional "total market" funds, the S&P TMI is often seen as more reflective of the investable universe because of how S&P filters for things like "investability" and trading volume.
Is it actually better for your portfolio?
There is no "better." There is only "fit."
If you’re a purist who believes that nobody can pick winners, the S&P Total Market Index is your best friend. By owning it, you are admitting you don't know if small-cap value will beat large-cap growth this year. You're saying, "I want it all."
Historically, the correlation between the TMI and the S&P 500 is extremely high—often 0.99. But that 0.01 difference represents thousands of smaller companies. If one of those tiny companies becomes the next Nvidia, you own it from day one in a total market index. In the S&P 500, you have to wait until it’s already a multi-billion-dollar giant before it gets added.
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You miss the "moonshot" growth phase in the 500. You capture it in the TMI.
The hidden risks of the "Total" view
It isn't all sunshine and diversification.
Small and micro-cap stocks are volatile. They are sensitive to interest rate hikes. When the Fed gets aggressive, the smaller companies in the S&P Total Market Index often feel the squeeze long before the cash-rich giants like Google or Berkshire Hathaway.
Also, liquidity can be an issue. In a market crash, those tiny stocks at the bottom of the index can see their prices crater because there simply aren't enough buyers. Because the index is market-cap weighted, these drops don't tank the whole index, but they do add a layer of "noise" that some investors find annoying.
Practical ways to track it
You can't "buy" an index. You buy the funds that track it.
While the S&P 500 has the SPY and VOO, the S&P Total Market Index is the basis for some of the most efficient "Total Stock Market" ETFs and mutual funds out there. ITOT (iShares Core S&P Total U.S. Stock Market ETF) is probably the most famous one. It’s incredibly cheap. The expense ratio is practically zero.
When you buy a fund like that, you are essentially buying a tiny piece of almost every public company in America.
Real-world performance check
Let's look at the numbers. Over long stretches—10, 20, 30 years—the difference between the S&P 500 and the S&P Total Market Index is usually measured in fractions of a percentage point.
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For example, in years where "Mega-Cap Tech" is the only thing working (like much of 2023 and early 2024), the S&P 500 usually wins. Why? Because it’s more concentrated in those winners.
But in years where the "breadth" of the market is strong—meaning the average company is doing well, not just the giants—the TMI takes the lead.
How to use this information right now
If you’re looking at your 401k or your brokerage account, don't just default to the S&P 500 because it's the name you know.
Check if you have an option for a "Total Market" fund.
It’s the ultimate "set it and forget it" investment. You don't have to worry about whether small-caps are in favor or if large-caps are overvalued. You own the whole pie.
Next Steps for Your Portfolio:
First, look at your current holdings and calculate how much of your U.S. stock exposure is strictly in the S&P 500. If it’s 100%, you are actually missing out on the performance of roughly 2,000+ smaller American companies.
Second, compare the expense ratios. Often, total market ETFs like ITOT or VTI (which tracks a similar CRSP index) are actually cheaper than some S&P 500 funds. If you can get more diversification for less cost, it’s a no-brainer.
Third, consider the "rebalancing" effect. Total market indices are self-cleansing. As companies grow, they move up the weightings. As they fail, they drop out. By holding the S&P Total Market Index, you’re participating in the natural evolution of the economy without having to trade a single share yourself.
Stop thinking of the market as just 500 companies. It’s much, much bigger than that.