The FT Wilshire 5000 Index (FTW5000) is a broad-based market capitalization-weighted index that seeks to capture 100% of the United States investible market. Learn about its history, significance, and how it differs from other market indices in this in-depth guide.
Introduction to the FT Wilshire 5000 Index (FTW5000)
The FT Wilshire 5000 Index, also known as FTW5000, is a market index with a rich history and significant influence on the financial world. In this comprehensive guide, we will delve into the details of this index, including its origins, characteristics, and why it’s a vital benchmark for investors.
What is the FT Wilshire 5000 Index (FTW5000)?
The FT Wilshire 5000 Index is a broad-based market capitalization-weighted index designed to encompass 100% of the United States investible market. Originally, it was known as the Wilshire 5000 Total Market Index (TMWX) until June 30, 2021, when it was rebranded as part of Wilshire’s partnership with The Financial Times.
Understanding the FT Wilshire 5000 Index
Named after the approximate number of stocks it contained at its launch, the Wilshire 5000 has an intriguing history. Initially starting with nearly 5,000 stocks, it reached its zenith with over 7,500 stocks in 1998. However, over time, the number of stocks included in the index has decreased, standing at 3,687 as of December 31, 2021.
The index covers all U.S. equities with readily available prices, excluding thinly-traded and bulletin-board issues. As a market capitalization-weighted index, it assigns more weight to companies with higher market capitalization and less to those with lower market capitalization. As of December 31, 2021, the index’s weightings were distributed as follows: 28% towards the information technology sector, 13% to the health care sector, and 13% to the consumer discretionary sector.
Pros and cons of the FT Wilshire 5000 Index
Here is a list of the benefits and drawbacks to consider.
- Comprehensive representation of the U.S. investible market.
- Market capitalization-weighted, reflecting the true market value of companies.
- Historical significance in tracking U.S. market performance.
- Excludes thinly-traded and bulletin-board issues, potentially missing some market dynamics.
- May not be as familiar to investors as more popular indices like the S&P 500 or Dow Jones Industrial Average.
In partnership with The Financial Times, Wilshire introduced six additional indexes as part of the FT Wilshire 5000 Series. These indexes are:
- FT Wilshire 2500 Index (FTW2500)
- FT Wilshire US Mega Cap Index (FTWUSG)
- FT Wilshire US Large Cap Index (FTWUSL)
- FT Wilshire US Mid Cap Index (FTWUSD)
- FT Wilshire US Small Cap Index (FTWUSS)
- FT Wilshire US Micro Cap Index (FTWUSO)
These indexes provide more specialized insights into various market segments.
History of the FT Wilshire 5000 Index (FTW5000)
The FT Wilshire 5000 Index was established by Wilshire Associates in 1974. In April 2004, it was renamed the “Dow Jones Wilshire 5000” after Dow Jones & Company assumed management. However, on March 31, 2009, the index returned to Wilshire Associates as its partnership with Dow Jones ended.
At its inception, the index had a value of 1404.60 points on the base date of December 31, 1980, with a total market capitalization of $1.405 trillion. Over time, corporate actions and changes in index composition led to adjustments in this relationship.
The FT Wilshire 5000 Index has witnessed several significant milestones in its history:
- On March 24, 2000, it closed at a record high of 14,751.64 points.
- It didn’t surpass this level until February 20, 2007.
- On April 20, 2007, it closed above 15,000 for the first time.
- The index reached an all-time high of 15,806.69 points on October 9, 2007, just before the Great Recession.
- On October 8, 2007, it closed below 10,000 for the first time since 2003.
- It reached a low of 6,858.43 points on March 9, 2009, representing a substantial market capitalization loss.
- On February 28, 2014, it hit its first intraday high above 20,000 points.
- On March 4, 2014, it closed above this milestone for the first time.
- On July 1, 2014, it closed above 21,000 points.
- As of February 1, 2022, the index traded at a near all-time high level of over 45,000.
Other broad market indexes
While the Wilshire 5000 is a widely-cited broad-based market index, other significant indexes also play crucial roles in the financial world. The CRSP US Total Market Index and the Dow Jones U.S. Total Market Index are essential benchmarks representing various segments of the U.S. stock market.
The Russell 3000 Index, maintained by FTSE Russell, tracks the performance of the 3,000 largest U.S.-traded stocks, representing a significant portion of the U.S. equity market.
How the FT Wilshire 5000 Index differs from other market indices
The FT Wilshire 5000 Index stands out among market indices due to its comprehensive approach. While the article has already touched on some key differences, here are more detailed comparisons:
1. Coverage of all investible U.S. market
Unlike the S&P 500 and Dow Jones Industrial Average, which represent specific segments of the market, the FT Wilshire 5000 Index includes virtually all publicly-traded companies. It is a true reflection of the U.S. investible market, making it a valuable tool for investors looking for a broad perspective.
2. Inclusion of smaller and less-known companies
The FT Wilshire 5000 Index doesn’t discriminate based on market capitalization or popularity. It includes small-cap and lesser-known companies, which can offer a unique view of market dynamics. Investors who want exposure to these segments often find the FTW5000 to be an invaluable reference.
FT Wilshire 5000 Index in modern finance
As financial markets evolve, so does the relevance of the FT Wilshire 5000 Index. Here, we explore how it fits into modern finance:
The role of ETFs
Exchange-traded funds (ETFs) have become popular investment vehicles. Many ETFs track the FT Wilshire 5000 Index, providing investors with an easy way to gain broad market exposure. This allows for diversified portfolios that align with the index’s composition.
Impact on passive investment strategies
The rise of passive investing, where investors seek to replicate the performance of market indices, has made the FT Wilshire 5000 Index more critical than ever. It serves as a benchmark for passive investment strategies and is often used as a comparison point for performance.
Conclusion: A timeless benchmark
The FT Wilshire 5000 Index remains a timeless benchmark in the world of finance. Its ability to encompass the entire U.S. investible market, adapt to changing market dynamics, and serve as a critical reference point for investors makes it an indispensable tool for those navigating the complexities of the financial world.
With its rich history and continuous relevance, the FT Wilshire 5000 Index is more than just a number; it’s a symbol of the ever-evolving American economy and its place in global finance.
Frequently asked questions
Is the FT Wilshire 5000 Index the same as the S&P 500 or Dow Jones Industrial Average?
No, the FT Wilshire 5000 Index is distinct from the S&P 500 and Dow Jones Industrial Average. While the S&P 500 and Dow Jones focus on specific segments of the market, the FT Wilshire 5000 aims to encompass 100% of the U.S. investible market, including a broader range of companies.
How often does the composition of the FT Wilshire 5000 Index change?
The composition of the FT Wilshire 5000 Index changes over time due to corporate actions and market dynamics. It is regularly updated to reflect the current state of the U.S. market, but the frequency of changes can vary.
What are some use cases for the FT Wilshire 5000 Index in investment strategies?
The FT Wilshire 5000 Index is used in various investment strategies, including benchmarking, passive investing, and constructing diversified portfolios through exchange-traded funds (ETFs). It provides a comprehensive view of the U.S. market and serves as a valuable reference point for investors.
How can investors access the FT Wilshire 5000 Index for tracking and analysis?
Investors can access the FT Wilshire 5000 Index through financial news outlets, investment platforms, or by referring to financial instruments like ETFs that track this index. These resources offer data and analysis related to the performance of the index.
What is the significance of the FT Wilshire 5000 Index in modern finance?
The FT Wilshire 5000 Index continues to be significant in modern finance due to its ability to represent the entire U.S. investible market. It is often used as a comparison point for various investment strategies and offers insights into market dynamics, making it a valuable tool for investors and financial professionals.
- The FT Wilshire 5000 Index (FTW5000) seeks to capture 100% of the investible U.S. market.
- Previously, it was traded as the Wilshire 5000 Total Market Index (TMWX).
- At its peak, the FT Wilshire 5000 Index included over 7,500 stocks, but as of Dec. 31, 2021, it comprises 3,687.
View Article Sources
- Wilshire 5000 Full Cap Price Index (DISCONTINUED – Federal reserve bank o saint louis
- United States Index: Wilshire 5000 | Economic Indicators – CEIC DATA
- Wilshire 5000 Equal-Weighted ETF– SEC
- What Is a Broad-Based Index, and What Are Some– SuperMoney