![]() Conventional wisdom at the time was that, in the language used by Benjamin Graham, "defensive investors" should limit themselves to "primary companies" in an industry. The S&P 500 is S&P's choice of "leading companies in leading industries." In 1957 when the index was developed, it was intended to represent, one could say, the whole market as seen by "normal" investors. This probably isn't important, but it does underline the fact that the extended market index is not the most suitable choice for fine control of "style box" weights in an overall portfolio. The extended market index is overweight in mid-cap growth.The differences involved are small, and probably of concern only to purists. Thus, for example, if an investor mixes funds based on different index provider's indexes, there can be significant overlap between these providers' large cap index funds and an S&P completion fund. Furthermore, different index providers divide the market between between large, mid, and small in different ways. Therefore, a completion index is not a pure combination of mid- and small-caps. The S&P 500 is mostly large-cap and often thought of as large-cap, but it is not a pure large-cap index.So, there is no overlap, no duplicated stocks in any mix of an S&P 500 fund and a completion index fund. Most or all "completion indexes" complete the S&P 500.Vanguard Total Stock Market Index Fund tracks a different index provider's Total Market index, the CRSP US Total Market Index, so in theory the results are not identical. So, if you add them back in the proper proportion (and rebalance as needed), the mix tracks S&P Total Stock Market Index. Vanguard's Extended Market Index Fund tracks the Standard & Poor's Completion Index, which is the S&P Total Stock Market Index with the S&P 500 stocks removed.One convenient source for the proper current percentage composition is Vanguard's benchmark comparison. This does not need to be done frequently or with scrupulous accuracy. The 80%/20% ratio may require rebalancing from time to time, and the ratio may change with the composition of the total market. Investors desiring to duplicate the total market portfolio using an extended market fund should manage their portfolio so as to include the S&P 500 fund and an Extended Market Index fund in about an 80%/20% proportion, and they will then be essentially holding the market. Obviously, any investor who is not constrained to hold an S&P 500 index fund can simply invest in a Total Stock Market index fund. ![]() An investor might be constrained by limited choices in a 401(k) plan, or by existing holdings of an S&P 500 fund in a taxable account that can't be exchanged without adverse tax consequences. The obvious reason why an investor would want the "Total Market with the S&P 500 stocks removed" is that the investor already holds an S&P 500 index fund. Investors who want to depart from total market weighting and choose their own proportion of large-cap stocks, probably want to adjust mid-cap and small-cap exposure independently too. There is no well-known investment theory that ascribes any particular virtue to "the total market except for the S&P 500" as an entity in itself. Primarily, then, these funds should be used by investors who want to invest in the total market, and would like to use a total stock market fund, but who, for whatever reason, find it necessary to hold a separate S&P 500 index fund. Together they provide exposure to the entire U.S. The fund is considered a complement to Vanguard 500 Index Fund. Vanguard's product summary says, in part: S&P 500 index plus S&P Completion index = S&P Total Market Index How to use an extended market fund
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