What Each One Covers
Before comparing performance or philosophy, it helps to understand precisely what each index includes.
Total Market Index
- All publicly traded US stocks (~4,000)
- Large-cap, mid-cap, small-cap, micro-cap
- ~100% of US equity market cap
- Every sector in proportion to market weight
- Automatically rebalances as company sizes change
S&P 500
- ~500 largest US companies
- Large-cap only
- ~80% of US equity market cap
- Every sector (same sectors, different weights)
- Committee-selected; quarterly rebalancing
The S&P 500 is not a random subset of the total market — it captures the 500 largest companies by market capitalisation, which together represent the overwhelming majority of total market value. The remaining ~20% that the total market adds consists entirely of mid-cap and small-cap companies.
| Characteristic | Total Market Index | S&P 500 |
|---|---|---|
| Number of holdings | ~4,000 | ~500 |
| Market cap coverage | ~100% | ~80% |
| Size exposure | Large, mid, small cap | Large cap only |
| Selection method | Rules-based, all eligible stocks | Committee-selected |
| Typical expense ratio (lowest) | 0.015% (FSKAX) | 0.015% (FXAIX) |
| Largest ETF (Vanguard) | VTI — 0.03% | VOO — 0.03% |
Historical Performance
Investors often assume that more diversification (total market) automatically means better returns. The data does not clearly support this. Over most long-term measurement periods, the two indices have tracked extraordinarily close to each other.
The S&P 500 represents approximately 80% of the total US market by value. This means 80% of your total market index return is the S&P 500 return. The additional 20% — mid and small caps — has to diverge dramatically and consistently from large caps to produce a meaningful difference in total market returns. Over most periods, it does not.
When the total market outperforms the S&P 500, it is typically because mid-cap and small-cap stocks had a particularly strong run. When it underperforms, large-cap stocks dominated. Which of these was true over any given period is knowable in hindsight but not predictable in advance.
From 1992 (when the first total market fund launched) through the mid-2020s, the annualised return difference between the CRSP US Total Market Index and the S&P 500 has generally been within 0.1–0.3% in either direction in any given decade. Neither has consistently outperformed the other.
The Case for Total Market
Completeness
The most fundamental argument: if your goal is to own the US equity market, a total market index does exactly that. The S&P 500 is a large-cap subset. Owning the total market means you cannot underperform the true US equity benchmark — because you are that benchmark.
The small-cap premium
Academic research — most notably Fama and French (1993) — documents a historical tendency for smaller companies to generate higher returns than larger companies over long periods, after controlling for market risk. This "size premium" or "small-cap premium" has been part of the academic finance literature for decades.
A total market index automatically captures whatever small-cap premium exists, in proportion to market weights. The S&P 500 does not.
Important caveat: the small-cap premium has been inconsistent in recent decades, particularly in the US market. Whether it persists going forward is actively debated among researchers. A total market index does not concentrate in small caps — it simply includes them at market weight, which is a modest exposure.
No arbitrary exclusion
The S&P 500 is committee-selected — there is human judgement involved in which companies are included. While the committee follows published criteria, the process is not fully mechanical. A purely rules-based index, like the CRSP US Total Market Index, removes this layer of potential discretion.
True market benchmark
For researchers, academics, and investors who want to measure their performance against "the market," the total market index is the more accurate reference point. The S&P 500 is a proxy for the market, not the market itself.
The Case for S&P 500
Practical equivalence
Because the S&P 500 represents 80% of US market cap, adding the remaining 20% through total market exposure has historically produced very little additional return — and occasionally deducted it. For many investors, the complexity of the total market vs. S&P 500 decision is not matched by the practical difference in outcomes.
Liquidity and tracking
S&P 500 index funds have extraordinary liquidity. The Vanguard S&P 500 ETF (VOO) regularly trades billions of dollars per day. This liquidity benefits institutional investors and makes S&P 500 ETFs efficient vehicles even for very large trades.
The industry standard
The S&P 500 is the default benchmark against which most investment managers, pension funds, and financial media measure performance. Investors who want their performance reported against the standard benchmark benefit from holding it.
Longest track record
The S&P 500 as a formal index dates to 1957. Its historical data series (with precursors) extends to the 1920s. The Wilshire 5000 dates only to 1974. For very long-term historical analysis, the S&P 500 data is more available.
The Academic Perspective
John Bogle himself expressed mild preference for the S&P 500 in his later writings — not because he thought it was superior, but because he was sceptical about the reliability of the small-cap premium going forward. Other prominent researchers, including Burton Malkiel (A Random Walk Down Wall Street) and William Bernstein (The Four Pillars of Investing), have written favourably about total market investing for its completeness.
The academic consensus, broadly stated: both are excellent choices. The total market is marginally more theoretically complete. The S&P 500 has similar expected returns and enormous liquidity. Neither is wrong. The decision is secondary to other factors — saving rate, asset allocation between stocks and bonds, and staying invested through volatility — which matter far more to long-term outcomes than the choice between these two indices.
VTI vs VOO — The ETF Comparison
| VTI (Total Market) | VOO (S&P 500) | |
|---|---|---|
| Provider | Vanguard | Vanguard |
| Index tracked | CRSP US Total Market | S&P 500 |
| Holdings | ~4,000 | ~500 |
| Expense ratio | 0.03% | 0.03% |
| Overlap in holdings | ~82% of VTI's value is shared holdings | |
VTI and VOO have the same expense ratio. Both are managed by Vanguard. Approximately 82% of VTI's value is in holdings that VOO also owns. The difference is the 18–20% allocated to non-S&P 500 mid-cap and small-cap stocks in VTI.
VTSAX vs VFIAX — The Mutual Fund Comparison
| VTSAX (Total Market) | VFIAX (S&P 500) | |
|---|---|---|
| Provider | Vanguard | Vanguard |
| Index tracked | CRSP US Total Market | S&P 500 |
| Expense ratio | 0.04% | 0.04% |
| Minimum investment | $3,000 | $3,000 |
| AUM | $1.4T+ | $1T+ |
Data current as of April 2026. Subject to change. Verify with Vanguard before investing.
Bottom Line
Both the total market index and the S&P 500 are sound choices for US equity exposure. The differences are real — coverage, composition, methodology — but have historically produced small performance divergences in either direction. Neither consistently outperforms the other over all periods.
Investors who care about owning the complete US market, capturing the small-cap premium, or holding a purely rules-based index will prefer the total market. Investors who prefer the simplicity and liquidity of the dominant industry benchmark, or who are sceptical of the small-cap premium's persistence, will prefer the S&P 500. Both choices are well-supported by evidence and sound reasoning.