So no one really knows whether the S&P 500 or Total Stock Market will have better returns in the next 30 years. 10.2%), as noted by Jack Bogle in this article. However, very long-run returns of the S&P 500 and Total Stock market (1928-2010) have shown the S&P 500 to have slightly higher returns than the total stock market (10.4% vs. In the past 15 years, the total stock market has had slightly higher long-term returns because of its mid-cap and small-cap components. (Potentially) slightly higher returns, with slightly more risk Many investors have no desire to tilt our portfolios towards small-cap stocks. Investing in the total stock market allows you to get mid-cap and small-cap exposure, in proportions equivalent to that of the U.S. Reasons to Invest in the Total Stock Market Diversification: Mid-cap and small-cap exposure in a single investment Investment aggregator services such as Personal Capital can help you sort out your large-cap and small-cap exposures, but owning specific large-cap and small-cap index funds simplifies this process. If you invest in the total stock market, then you need to account for the fact that the total stock market is approximately 78% large caps, 17% mid-caps, and 5% small-caps. By investing in the S&P 500, you can more cleanly tailor your large-cap and small-cap exposures to your liking. Some investors like to overweight (tilt) their portfolios towards small cap stocks.

If you want small-cap exposure, you can invest directly into a small-cap ETF When you invest in the S&P 500, the temptation to compete against a benchmark index is eliminated. The competitive nature of investors comes out even in the index fund world, where even though youвЂ™re trying to be average, some people try to seek a вЂњbetter averageвЂќ than the S&P 500. Reasons to Invest in the S&P 500 The S&P 500 is the вЂњgold standardвЂќД®ven experienced, well-educated index fund investors will often try to compare their portfolios to the S&P 500.

The diversification benefits of the Total Stock Market index over the S&P 500 are relatively limited. large-cap stocks.ДЇor comparison, the correlation between VTI and EFA (an International Developed Stock Markets ETF) was 83.4%, and the correlation between VTI and AGG (a total bond index ETF) was 83.4%. small cap stocks have a high correlation with U.S. This is because approximately 75% of the total stock market portfolio is the S&P 500, and U.S. Using this correlation calculator by BuyUpside, the correlation between VTI (VanguardвЂ™s Total Stock Market ETF), and VOO (VanguardвЂ™s S&P 500 ETF) is 99.96%. The correlation in returns between the S&P 500 and the Total Stock Market Index is very, very high. Historical ReturnsДЄnd here are the recent historical returnsВ of the S&P 500 and Total Stock Market index, as of January 4, 2019: Returns LetвЂ™s look at the tale of the tape between these two indices, using the Vanguard ETF for the S&P 500 ( VOO) and the Total Stock Market ( VTI) as proxies: These are both excellent choices, but at some point, you need to pick one or the other. The two most common stock funds are the S&P 500 and the Total Stock Market index fund. The backbone of any three-fund portfolio is a U.S.

Total stock market gain 2017