Comparison Guide

S&P 500 Index Fund vs Total Stock Market Fund

S&P 500 (VOO) vs Total Stock Market (VTI) compared. See why the performance difference is tiny and which index fund actually makes more sense for your portfolio.

Side-by-Side Comparison

S&P 500 Index Fund

Pros

+Tracks the 500 largest US companies — the most recognized benchmark in the world
+Rock-bottom expense ratios (VOO at 0.03%, FXAIX at 0.015%)
+Extremely liquid with tight bid-ask spreads
+Warren Buffett's recommendation for most people
+Massive assets under management means stability and efficiency

Cons

-Missing mid-cap and small-cap stocks (~20% of the US market)
-Cap-weighted means top 10 stocks dominate performance
-No exposure to smaller companies that may grow faster
-Selection bias — companies are added AFTER they've already grown large

Best For

Anyone who wants the simplest possible portfolio. If Buffett told his wife to use an S&P 500 fund, who am I to argue?

Total Stock Market Fund

Pros

+Holds ~4,000 stocks — captures the entire US market including small and mid caps
+Slightly more diversified across company sizes
+Captures the small-cap premium (if it still exists)
+Same ultra-low expense ratios (VTI at 0.03%, FSKAX at 0.015%)
+No stock selection bias — you own everything

Cons

-Performance is nearly identical to S&P 500 (correlation above 0.99)
-Small-cap inclusion adds marginal diversification but not meaningful risk reduction
-Slightly lower liquidity on the smallest holdings (irrelevant for the fund itself)
-The 'broader diversification' argument is overstated — the extra 3,500 stocks account for a tiny portfolio weight

Best For

Investors who want maximum US market coverage and mild OCD about owning literally everything. Also anyone in a Boglehead forum who doesn't want to get yelled at.

Feature	S&P 500 Index Fund	Total Stock Market Fund
Top Advantage	Tracks the 500 largest US companies — the most recognized benchmark in the world	Holds ~4,000 stocks — captures the entire US market including small and mid caps
Biggest Drawback	Missing mid-cap and small-cap stocks (~20% of the US market)	Performance is nearly identical to S&P 500 (correlation above 0.99)
Best For	Anyone who wants the simplest possible portfolio. If Buffett told his wife to use an S&P 500 fund, who am I to argue?	Investors who want maximum US market coverage and mild OCD about owning literally everything. Also anyone in a Boglehead forum who doesn't want to get yelled at.

Glen's Verdict

Former hedge fund manager, current index fund enthusiast

Honestly? It doesn't matter. The performance difference between VTI and VOO over the past 20 years is basically a rounding error. You're splitting hairs on the closest thing to a no-lose choice in investing. I hold VTI because I like owning the whole market, but if your 401(k) only has an S&P 500 fund? That's perfectly fine. The Bogleheads will debate this until the heat death of the universe. Pick one, max it out, and spend your energy on something that actually matters — like your savings rate.

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Frequently Asked Questions

Which is better, S&P 500 Index Fund or Total Stock Market Fund?

It depends on your situation. S&P 500 Index Fund is best for: Anyone who wants the simplest possible portfolio. If Buffett told his wife to use an S&P 500 fund, who am I to argue? Total Stock Market Fund is best for: Investors who want maximum US market coverage and mild OCD about owning literally everything. Also anyone in a Boglehead forum who doesn't want to get yelled at.

What are the main differences between S&P 500 Index Fund and Total Stock Market Fund?

The key differences come down to their strengths. S&P 500 Index Fund advantages include tracks the 500 largest us companies — the most recognized benchmark in the world and rock-bottom expense ratios (voo at 0.03%, fxaix at 0.015%). Total Stock Market Fund advantages include holds ~4,000 stocks — captures the entire us market including small and mid caps and slightly more diversified across company sizes.

Can I have both S&P 500 Index Fund and Total Stock Market Fund?

In many cases, yes. Having both can provide diversification and flexibility. Evaluate your specific needs, goals, and eligibility requirements to determine if using both makes sense for your situation.

What are the downsides of S&P 500 Index Fund?

Missing mid-cap and small-cap stocks (~20% of the US market) Cap-weighted means top 10 stocks dominate performance No exposure to smaller companies that may grow faster Selection bias — companies are added AFTER they've already grown large

What are the downsides of Total Stock Market Fund?

Performance is nearly identical to S&P 500 (correlation above 0.99) Small-cap inclusion adds marginal diversification but not meaningful risk reduction Slightly lower liquidity on the smallest holdings (irrelevant for the fund itself) The 'broader diversification' argument is overstated — the extra 3,500 stocks account for a tiny portfolio weight

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