The Wilshire 5000 Total Market Index The Logistics Behind Managing The U.S. Stock Market

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Overview: The broad diversification, low turnover, low cost and excellent tax efficiency of total stock market funds have become increasingly popular with both institutional and retail investors. As the only index representing the entire stock market, and by definition containing the broadest possible diversification and lowest turnover, the Wilshire 5000 is an ideal market benchmark and fund portfolio. The Wilshire 5000 Total Market Index, commonly known as the Wilshire 5000, represents the entire U.S. equity market and is comprised of all publicly traded stocks. Introduced in 1974, the Wilshire 5000 was constructed to serve four main constituencies: economists, practitioners, academicians, and legislators. Many of these professionals have embraced the Wilshire 5000 as a measure of wealth for the U.S. economy and find it invaluable for any meaningful research of the stock market as a whole. Because of its broad diversification and low turnover, the Wilshire 5000 has become increasingly popular with the investment management community. All of the major index fund man-agars have created successful funds that track the Wilshire 5000 within 10 to 30 basis points annually. This article describes the portfolio management techniques used to successfully manage a portfolio indexed to the Wilshire 5000 as well as argue the case for using the index as a benchmark for the 'market portfolio' as described by the Capital Asset Pricing Model. For all of these reasons, it is anticipated that the Wilshire 5000 Index fund will continue to thrive as a core strategy for both institutional and retail equity portfolios.

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Format: HTML | Date: Jan 2003 | Pages: 5