What is the Wilshire 5000 Index?

Published by Thomas Herold in Economics, Investments, Trading

'Wilshire 5000 Index' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

The Wilshire 5000 Index is also called the Total Stock Market Index. The reason for this impressive sounding name is that its ultimate goal is to track the aggregate returns of most ever publicly traded stock that is based in the United States and trades over one of the major American stock market exchanges. This index is not necessarily the most famous one in the investing universe though. The truth is that despite this fact, it remains the biggest market index on earth, when it is measured by actual market value.

The Wilshire 5000 Index is actually a misnomer. There are not only 5,000 firms within the index as many incorrectly suppose. Instead, there are over 6,700 individual companies’ stocks within it. The number of firms actually changes all the time. When the Index was first created, it actually had only 5,000 composite companies. As more business have been created and traded publically on the major three U.S. exchanges since the Wilshire’s inception, this has necessarily required that they add more net numbers of companies in order to keep up with their objective of representing all major American corporations.

In order to be a candidate for inclusion in the Wilshire 5000 Index, there are three criteria which the firms must meet. They have to be headquartered domestically within the United States. They must also trade actively over one of the significant stocks exchanges in America. Finally, their pricing data has to be easily accessible to both members of the general public and the American investing community.

The Wilshire index actually does not evenly weight all of its constituent members, as is typical with other market cap weighted indices as well. In fact, they provide a greater weighting to firms that are more highly valued and an underweighting to those companies which possess a lesser firm value. The ticker symbol for The Wilshire 5000 Index proves to be TMWX. The index is famous for its efforts to track the all around American stock markets’ performance.

Some publically traded United States’ based corporations are routinely excluded from any inclusion in The Wilshire 5000 Index. Among these are the stocks which trade over the OTC BB Over the Counter Bulletin Board platform and system. This includes the stocks from micro cap companies and those which are valued as penny stocks. All companies which trade on the NASDAQ, American Stock Exchanges, and NYSE New York Stock Exchanges are typically included. It is what makes the Wilshire index the most truly diverse of all American indices anywhere.

Those larger companies which are a part of the Wilshire index have a greater weighting and will thus have greater impact on the movements of the underlying index.

With the Wilshire 5000 Index, the 500 biggest firms command over 70 percent of the total value of the index. This actually means that it is an economic performance measurement of only American companies, the largest 500 of which dominate the up and down movement of the index.

It is important for investors to realize that the ETFs, index funds, and other mutual funds based on the Wilshire 5000 have a unique expense characteristic. The costs of maintaining a passive portfolio of over 6,700 different stocks which are constantly changing naturally will be higher than for a index fund that has only 30 or even 500 composite constituent corporations within it, as in the Dow Jones 30 companies’ index or the S&P 500 composite index. Despite this fact, the fees do not amount to a much higher percentage wise difference for investments in the Wilshire 5000 Index.

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The term 'Wilshire 5000 Index' is included in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.