A Low-Cost Way to Complete a Large-Cap Portfolio
This fund is an inexpensive option for rounding out a U.S.-equity portfolio.
Vanguard Extended Market Index ETF (VXF) is an ideal supplement to a large-cap portfolio as it is designed to be paired with an S&P 500 Index fund. This fund tracks the S&P Completion Index, which holds virtually every liquid U.S. stock outside of those in the S&P 500 Index.
Filling the gaps in the S&P 500 means that the fund holds a handful of large-cap names that are not in the S&P 500, such as Facebook (FB) and Las Vegas Sands (LVS). These include companies that don't meet the S&P 500 Index's 50% public float requirement, companies that don't meet the index's domicile requirement, and recent initial public offerings that don't meet its six to 12 month seasoning requirement. The charts below graph the weightings of the largest 3,500 stocks in the S&P 500 and the S&P Completion Index ranked from largest to smallest. A few things stand out when looking at these charts. The first is the skew of the S&P 500 toward mega-cap stocks. The second is that the S&P Completion Index has most of its weight in the smaller stocks toward the right-hand side of the chart. It is also apparent that the S&P Completion Index includes a smattering of larger names that are absent from the S&P 500 for the reasons outlined above. That said, the majority of the Completion Index consists of mid- and small-cap names and is rounded out with a decent chunk of micro-cap stocks.
Michael Rawson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.