Understanding the Differences between Index Funds

Index Funds are Not Created Equal And Why it Matters to You as an Investor In terms of total dollars invested, index funds represented 14% of the stock market and 3% of the bond market. Index funds and ETFS made up 35% of stock and 17% of bond open-end funds by the end of 2013. Many investors assume that all index funds are the same. For example, a common misconception is that all index mutual In reality, there are literally hundreds of different indexes available that track a wide range of stock, bond, and other asset classes. Fund companies may track one or many funds or ETFS track the S&P 500 index. different indexes. Below, we compare U.S. large cap, mid cap, and small cap stock indexes from three major index providers: S&P Dow Jones, Russell, and CRSP. Often, there are significant differences between indexes: ip Number of stocks in the index The breadth of the index relative to the entire U.S. stock market The depth of the index in terms of market cap How often the index is reconstituted or rebalanced Which fund families license an index making it available to investors U.S. Large Cap Stocks S&P 500 Index Russell 1000 Index CRSP U.S. Large Cap Index Facts Market Cap of Largest Company Median Company $560.4 Billion $7.6 Billion $2.2 Billion" $560.4 Billion $18.1 Billion $3.8 Billion $560.4 Billion $12.8 Billion Smallest Company $753 Million Approximate Coverage of Total U.S. Market Cap 80% 92% 85% Reconstitution Quarterly Annually Quarterly Number of Stocks 100 200 S&P 500 Index 501 stocks CRSP U.S. Large Cap Index 300 654 stocks 400 500 Russell 1000 Index 1,026 stocks 600 700 800 900 1,000 Top 10 Constituents Apple Inc Apple Inc Apple Inc Exxon Mobil Corp Exxon Mobil Corp Exxon Mobil Corp Microsoft Corp Microsoft Corp Google Inc Class A Johnson & Johnson Johnson & Johnson Microsoft Corp General Electric Co General Electric Co Johnson & Johnson Wells Fargo & Co Wells Fargo & Co Wells Fargo & Co Chevron Corp Chevron Corp General Electric Co Chevron Corp Berkshire Hathaway Inc Berkshire Hathaway Ic Berkshire Hathaway Inc JPMorgan Chase & Co JPMorgan Chase & Co Procter & Gamble Co Procter & Gamble Co JPMorgan Chase & Co Major Fund Families Using this Index Vanguard Vanguard Vanguard iShares iShares SPDR SPDR U.S. Mid Cap Stocks Russell S&P MidCap 400 Index Midcap Index CRSP U.S. Mid Cap Index Facts Market Cap of Largest Company Median Company $11.4 Billion $3.9 Billion $1.3 Billion $29.9 Billion $22.4 Billion $6.3 Billion $2.2 Billion" $8.3 Billion Smallest Company $753 Million Approximate Coverage of Total U.S. Market Cap 7% 28% 15% Reconstitution Quarterly Annually Quarterly Number of Stocks 100 S&P MidCap 400 Index CRSP U.S. Mid Cap Index 200 369 stocks 400 stocks 300 Russell Midcap Index 400 832 stocks 500 600 700 800 Top 10 Constituents Affiliated Managers Grp Vertex Pharmaceuticals Noble Energy Inc Applied Materials Inc Equinix Inc Delphi Automotive AON PlC SL Green Realty Corp Western Digital Corp NetFlix Inc United Rentals Inc Mylan Inc Sempra Energy Schein Henry Inc Health Care REIT Inc Kroger Co Advance Auto Parts Inc Crown Castle International Corp Moodys Corp Southwest Airlines Co Realty Income Corp Cigna Corp Endo International plc Avalonbay Cmntys Forest Laboratories Inc Inc Hanesbrands Inc Trimble Navigation Ltd Chipotle Mexican Grill SanDisk Corp Seagate Technology Major Fund Families Using this Index Vanguard iShares Vanguard iShares SPDR U.S. Small Cap Stocks S&P SmallCap 600 Index Russell 2000 Index CRSP U.S. Small Cap Index Facts Market Cap of Largest Company Median Company Smallest Company $5.6 Billion $4.5 Billion $7.6 Billion $1.1 Billion $751 Million $1.5 Billion $156 Million $169 Million* $16 million Approximate Coverage of Total U.S. Market Cap 3% 9% 13% Reconstitution Quarterly Annually Quarterly Number of Stocks 100 200 S&P SmallCap 600 Index 300 600 stocks 400 500 600 CRSP U.S. Small Cap Index 700 1,449 stocks 800 900 Russell 2000 Index 1,000 1,975 stocks 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000 Top 10 Constituents Questcor Pharmaceuticals InterMune Inc Hillshire Brands Co Prosperity Bancshares Salix Pharmaceutical Centene Corp Inc Foot Locker Inc LaSalle Hotel Properties SBI Aspen Technology Inc Arthur J Gallagher & Com WEX Inc Teledyne Technologies Inc Isis Pharmaceuticals Inc Harma Intl Inds Inc Toro Co Alkermes Plc Tenneco Inc Darling Ingredients Inc Gannett Inc PolyOne Corp Belden Inc Packaging Corp Amer Investors Bancorp Inc Rite Aid Corp Tanger Factory Outlet Centers Ultimate Software Group Inc Snap On Inc Synaptics Inc Brunswick Corp Moog Inc A Major Fund Families Using this Index Vanguard Vanguard Vanguard iShares iShares SPDR SPDR Data as of June 30, 2014 except where noted. *Data as of May 31, 2014 WEALTH ENGINEERS science | not speculation Sources: S&P Dow Jones Indices LLC, a part of McGraw Hill Financial Russell Investments Center for Research in Security Prices at Chicago Booth The Vanguard Group, Inc. 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