General Stock Investment Strategies/Mutual Fund Investing



Is it a good idea to invest in both a S&P 500 index fund and a total equity market index fund?

I thank you for your reply.

Kenneth, just saw this question from ages ago in my queue on the site - not sure why I didn't see it originally. In case you're still wondering about this...

There's a lot of overlap in holdings between an S&P 500 index fund and a US total-market fund. So their performance is highly correlated, meaning they go up & down in very similar ways. If you look around online you can find comparisons between different indices to see how they overlap. One example is from Russell, whose Russell 3000 index is a "total market" type index; nearly 80% of its value comes from the stocks in the S&P 500:

So adding one to the other doesn't really change your investment mix all that much. If the goal is to complement the S&P 500 companies with "the rest of the stock market" there are more-specific funds that will accomplish that goal. If the goal is to own "all US stocks" a total-market fund is a better fit - though some people only want to own larger US companies and don't care about skipping the smaller ones. It really gets down to the point of this specific holding.

And if by "total market" you mean one of the global funds that include a lot more asset classes from overseas - some even include bonds - it might be quite different from an S&P 500 fund. Again, main point is how much overlap they have in holdings.

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Tad Borek


I am a San Francisco-based investment adviser and attorney.


I opened my investment advisory practice, Borek Financial Management, in 1999, and have been a licensed attorney since 1993.

I received my B.S from Cornell University, and a J.D. from George Washington University Law School.

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