Key Takeaways
- Broad U.S. stock market index with ~3,700 stocks.
- Float-adjusted, market cap-weighted for public shares.
- Includes all market caps, tech sector dominates.
- Used as comprehensive benchmark for portfolio performance.
What is Wilshire 5000 Total Market Index (TMWX)?
The Wilshire 5000 Total Market Index (TMWX) is a broad, float-adjusted, market capitalization-weighted index tracking nearly all publicly traded U.S. equity securities with readily available prices on major exchanges like the NYSE and Nasdaq. It serves as a comprehensive benchmark representing the entire U.S. stock market beyond narrower indexes such as the S&P 500.
This index, originally launched by Wilshire Associates in 1974 and recently rebranded, captures company stocks across all market capitalizations and sectors, providing an extensive view of the market’s performance and the macro-environment influencing investments.
Key Characteristics
The Wilshire 5000 offers a wide-reaching snapshot of the U.S. equity market with several defining features:
- Comprehensive Coverage: Includes over 3,600 stocks from mega-cap to micro-cap companies, excluding OTC and private firms.
- Float-Adjusted Weighting: Weights companies by shares available for public trading, reflecting true market exposure.
- Diverse Sector Representation: Technology dominates, with significant healthcare and financial services components.
- Dynamically Updated: Constituents change regularly based on exchange listings and market capitalization.
- Benchmark Usage: Used to assess broad market performance and compare fund returns.
How It Works
The index calculates performance by weighting each company according to its float-adjusted market capitalization, which excludes restricted shares held by insiders. This approach ensures that the index reflects the market value of shares actually available to investors, allowing you to gauge the market’s investable portion.
Companies are added or removed based on their listing status on major exchanges and availability of pricing data. The index’s broad scope means it reflects fluctuations across the entire U.S. equity market, including changes in the valuation of major players like Microsoft and Apple.
Examples and Use Cases
Investors and portfolio managers rely on the Wilshire 5000 for various purposes, including broad market exposure and performance benchmarking:
- Technology Giants: Top holdings such as Microsoft, Apple, and NVIDIA represent a significant portion of the index’s weight.
- Sector Diversification: The index’s coverage spans sectors like healthcare, financial services, and communication, reflecting real market conditions.
- Index Fund Selection: Many investors use low-cost index funds that track total market indexes similar to Wilshire 5000 for broad diversification, such as those discussed in best low-cost index funds.
- Factor Investing: Some investors analyze the Wilshire 5000 components using factor investing strategies to target specific investment drivers.
Important Considerations
When using the Wilshire 5000 as a benchmark or investment guide, consider that its broad scope includes high volatility from micro-cap and small-cap stocks, which can affect returns. Additionally, the heavy weighting of technology stocks means sector-specific risks can influence index performance significantly.
Understanding how the index interacts with overall market trends and economic conditions can improve your investment decisions, especially when combined with data analytics to interpret market signals effectively.
Final Words
The Wilshire 5000 Total Market Index offers a comprehensive snapshot of the U.S. equity market, covering a broad range of sectors and company sizes. To leverage its full market representation, consider comparing fund options that track this index and evaluate how they fit with your diversification goals.
Frequently Asked Questions
The Wilshire 5000 Total Market Index (TMWX), now known as the FT Wilshire 5000, is a comprehensive, float-adjusted market capitalization-weighted index that tracks nearly all publicly traded U.S. equity securities on major exchanges like the NYSE and Nasdaq.
Unlike the S&P 500, which includes 500 large-cap companies, the Wilshire 5000 covers a much broader spectrum of the U.S. stock market by including stocks of all sizes, from mega-cap to micro-cap, across virtually every sector.
Float-adjusted market capitalization means the index weights companies based on the market value of shares available for public trading, excluding shares held by insiders or governments, providing a more accurate reflection of the investable market.
As of the end of 2021, the Wilshire 5000 included approximately 3,687 stocks, though this number fluctuates as companies are added or removed from major exchanges; the '5000' in its name reflects its original scope, not a fixed count.
Information technology is the most influential sector, making up about 28% of the index, followed by healthcare at around 13%, with tech giants like Microsoft, Apple, and NVIDIA among the top holdings.
Because it includes nearly all publicly traded U.S. stocks across all market caps and sectors, the Wilshire 5000 offers a comprehensive view of the market's overall performance, making it a preferred benchmark for many investors and fund managers.
The index excludes privately held companies, over-the-counter (OTC) 'pink sheet' stocks, and bulletin board market listings, focusing only on publicly traded companies with readily available prices on major exchanges.
Launched in 1974 by Wilshire Associates, it was rebranded as the FT Wilshire 5000 in 2021 following a partnership with the Financial Times, with historical peaks reflecting market events like the dot-com bubble and the Great Recession.
