The FT Wilshire 5000 Index (FTW5000) is a comprehensive, market capitalization-weighted index designed to reflect the entirety of the United States investable securities market. Known for its broad coverage, it aims to capture 100% of the U.S. equity market, making it a vital tool for investors seeking a holistic view of market performance.
Key Features of the FTW5000
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Market Representation: The FT Wilshire 5000 Index encompasses nearly all publicly traded U.S. stocks, providing a more inclusive measure compared to other indices such as the S&P 500 or Dow Jones Industrial Average. While the name suggests it originally tracked around 5,000 stocks at launch, the index peaked at over 7,500 stocks in 1998 but has seen a decline to approximately 3,687 components as of December 31, 2021.
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Market Capitalization-Weighted: Like other market capitalization-weighted indices, the value of the FT Wilshire 5000 is influenced more significantly by larger companies. As of late 2021, the index was notably tilted towards the information technology sector, which constituted 28% of its value, followed by the healthcare and consumer discretionary sectors at 13% each.
Recent Developments
The index underwent a rebranding from the Wilshire 5000 Total Market Index (TMWX) on June 30, 2021, as part of Wilshire's partnership with The Financial Times. This transition included the launch of six additional indices under the FT Wilshire 5000 Series, aimed at providing tailored coverage across different segments of the market. These include:
- 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)
The Evolution of the FT Wilshire 5000
Historical Context
Established by Wilshire Associates in 1974, the index originally aimed to provide the most extensive representation of the U.S. equity market. It was briefly managed by Dow Jones & Company in 2004, returning to Wilshire in 2009.
The historical performance of the index showcases its resilience and adaptation to market conditions:
- Its initial value stood at 1,404.60 points on December 31, 1980.
- The index reached significant milestones, including a peak of 15,806.69 points on October 9, 2007, just before the onset of the financial crisis.
- Following a steep decline during The Great Recession, where it bottomed at 6,858.43 points on March 9, 2009, the index showcased an impressive recovery, crossing the 20,000 points milestone for the first time on February 28, 2014, and further exceeding 21,000 shortly thereafter.
As of February 1, 2022, the index traded at a historic high of over 45,000 points.
Comparison with Other Broad Market Indices
While the Wilshire 5000 remains a prominent measure of the total U.S. market, several other indices exist that also strive for comprehensive coverage:
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CRSP US Total Market Index: This index features nearly 4,000 stocks across mega-, large-, small-, and micro-capitalizations, similar to the FTW5000's methodology.
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Dow Jones U.S. Total Market Index (DWCF): Covering a wide array of U.S. common stocks, this index provides extensive, market-capitalization-weighted coverage of the U.S. stock market.
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Russell 3000 Index: Tracking the largest 3,000 publicly traded U.S. stocks, this index accounts for approximately 98% of U.S. equities, offering broad-based exposure.
Conclusion
The FT Wilshire 5000 Index stands as a significant benchmark for investors aiming for a complete overview of the U.S. equities market. Its broad coverage, encompassing various sectors and market capitalizations, along with its historical significance and evolution, make it a vital instrument for assessing market performance and making informed investment decisions. Understanding indices like the FT Wilshire 5000 can provide critical insights into market dynamics and help shape investment strategies for diverse portfolios.