History of the Total Market Index

On December 14, 1974, Wilshire Associates — a California-based investment firm — introduced the Wilshire 5000 Total Market Index. It was the first index designed to measure the performance of every publicly traded US equity security.

The index was named for the approximately 5,000 companies it tracked at launch. Unlike the S&P 500 or Dow, it imposed no size cutoff. Every stock listed on the NYSE, Nasdaq, and other US exchanges that met minimum liquidity requirements was included.

For the first decade of its existence, the Wilshire 5000 was primarily a research tool — useful for academics and institutional investors measuring their performance against the true total market, but not yet available as an investment vehicle.

In 1974, John Bogle was fired as president of Wellington Management after a failed merger. He pivoted, founding the Vanguard Group with an unusual mandate: a fund company owned by its investors, operating at cost rather than for profit.

Bogle had been reading the emerging academic literature on market efficiency — the idea that stock prices reflect all available information, making it extremely difficult for active managers to consistently outperform the market after fees. His conclusion was practical: if most managers can't beat the market, give investors the market at the lowest possible cost.

On August 31, 1976, the Vanguard First Index Investment Trust — now the Vanguard 500 Index Fund (VFINX) — launched as the first index fund available to retail investors. It tracked the S&P 500. Wall Street derided it as "Bogle's Folly." Investors were initially sceptical. But it was the conceptual foundation on which total market investing would be built.

On April 27, 1992, Vanguard launched the Vanguard Total Stock Market Index Fund (ticker: VTSMX) — the first fund to give retail investors access to the entire US equity market in a single, low-cost vehicle. The fund tracked the Wilshire 5000.

Bogle had extended his S&P 500 logic: why own 500 large companies when you can own the entire market? Total market ownership eliminated benchmark risk relative to the true US equity universe — the possibility that large-cap stocks might underperform the broader market over long periods. It also captured whatever premium existed in mid-cap and small-cap stocks.

The fund launched with minimal fanfare and modest initial assets. The concept of passive total market investing was still unfamiliar to most retail investors, who continued to favour actively managed funds with prominent managers and marketing budgets.

In 2001, Vanguard launched the Vanguard Total Stock Market ETF (ticker: VTI) — the ETF share class of the same total market fund. It also tracked the Wilshire 5000.

The ETF structure was transformative. Unlike the mutual fund (VTSMX), which required a minimum investment and could only be purchased at day-end net asset value, VTI could be bought for the price of a single share through any brokerage account. Minimum investment: one share. Expense ratio: among the lowest available.

Total market investing was now accessible to any investor with a brokerage account, regardless of the account size. This broadened the potential investor base significantly and began driving assets into total market index funds at scale.

The 2008 financial crisis proved a pivotal moment for index investing. Many actively managed funds suffered losses as severe as — or worse than — the broad market, while charging substantially higher fees. Investors who had been paying for active management saw its limits under stress.

The years following 2008 saw a sustained shift of assets from active to passive funds. Total market index funds, with their broad diversification and near-zero costs, were direct beneficiaries. VTSMX and VTI grew rapidly. The Bogle thesis — that low cost and broad diversification would outperform most active strategies over time — was being validated in real time across millions of portfolios.

In October 2012, Vanguard completed a transition of its Total Stock Market Index Fund from the Wilshire 5000 to the CRSP US Total Market Index, maintained by the Center for Research in Security Prices at the University of Chicago Booth School of Business.

The switch was primarily motivated by cost — CRSP licensing fees were significantly lower than Wilshire's — but CRSP also offered methodological advantages. The CRSP index used market-cap bands rather than fixed stock counts to define size segments, reducing unnecessary turnover at the boundaries. A company wouldn't be forced in or out of the index simply because it crossed an arbitrary rank threshold.

The fund, renamed to VTSAX in the Admiral Shares class, became the most widely held mutual fund in the United States by assets — eventually surpassing even the Vanguard 500 Index Fund. VTSAX represents the largest single pool of passively invested assets tied to a total market index in history.

On August 1, 2018, Fidelity Investments launched the Fidelity ZERO Total Market Index Fund (FZROX) with a 0.00% expense ratio — the first zero-cost total market index fund available to retail investors.

Fidelity's move was strategically aggressive: by eliminating the expense ratio entirely, it undercut every competitor and aimed to win market share among new investors opening their first brokerage accounts. The fund tracks a Fidelity-proprietary total market index rather than CRSP or Wilshire, and can only be held in Fidelity accounts (it cannot be transferred in-kind to other brokerages).

The launch forced immediate competitive responses. Fidelity also cut the expense ratio on its CRSP-tracking fund (FSKAX) to 0.015% — the lowest available for a fund tracking the standard CRSP index. The fee war among total market index fund providers was over: costs had reached effectively zero for retail investors.