S&P 500 index funds vs. total market index funds
Index investing has become one of the most accessible ways for people to participate in the stock market. Two of the most widely referenced categories are S&P 500 index funds and total market index funds. This article explores the key distinctions between these two fund types.
Anzél Killian
For educational purposes only. Index funds aren’t offered directly on the Crypto.com App or via Crypto.com Stocks. You can, however, access US stocks and index-tracking ETFs at 0% commission.*
What is an S&P 500 index fund?
An S&P 500 index fund is a fund that aims to replicate the performance of the S&P 500, one of the most recognized benchmarks in global markets. This index represents approximately 500 large US stocks across industries such as technology, healthcare, financials and consumer goods.
Because these companies tend to be among the largest and most established in the country, the S&P 500 is commonly viewed as a proxy for the overall US stock market.
As of 2025, the S&P 500 accounts for roughly 80% of the total US stock market by market capitalization.1 That concentration gives S&P 500 index funds substantial exposure to the country’s corporate leaders, enabling investors to participate in the performance of companies with long trading histories and significant economic influence.
How does an S&P 500 index fund work?
An S&P 500 index fund tracks the S&P by holding the same companies in roughly the same proportions. This passive approach is designed to match the index’s performance rather than outperform it.
Factors such as expense ratios, tracking methodologies and rebalancing schedules can influence how closely a fund aligns with the index, but the goal remains consistency and simplicity.
Pros and cons of an S&P 500 index fund
Pros
- Straightforwardness – It tracks a well-known, widely used benchmark.
- Liquidity – The S&P 500 is one of the most actively referenced and traded indexes.
- Lower costs – Passive index funds often maintain low expense ratios compared with actively managed funds.
- Historical resilience – The index includes many long-standing companies with stable earnings histories.
Cons
- Large-cap focus only – No exposure to mid-cap or small-cap companies.
- Concentration risk – Larger companies may dominate index performance due to market-cap weighting.
What is a total market index fund?
A total market index fund is a fund that tracks a much broader range of US companies. Rather than focusing exclusively on large-cap firms, it includes large-, mid- and small-cap companies – often thousands of stocks across the full spectrum of the US equity market.
Most total market index funds follow comprehensive market benchmarks designed to reflect the entire investable US stock universe. These indexes typically contain thousands of companies, representing both longstanding corporations and smaller, emerging businesses.
How do total market index funds work?
Similar to S&P 500 index funds, total market index funds use a passive strategy. They aim to mirror the performance of their chosen benchmark using market-cap weighting. This means that while the fund does hold a large number of companies, the biggest firms still have the greatest influence on performance – but smaller companies are still represented.
Pros and cons of total market index funds
Pros
- Broader exposure – Includes companies of all sizes.
- Opportunity to capture possible growth from smaller firms – Small and mid caps may experience different market cycles than large companies.
- Comprehensive market coverage – Reflects nearly the entire US equity market.
Cons
- May experience slightly higher volatility – Due to exposure to smaller, more dynamic companies.
- More complex underlying index – Holds significantly more securities.
Key differences between an S&P 500 index fund and total market index funds
S&P 500 index fund | Total market index funds | |
Market coverage | ~500 large-cap companies | Thousands of large-, mid- and small-cap companies |
Share of total US market | ~80% of market cap | Nearly all of the investable market |
Diversification | Lower (concentrated in large caps) | Higher (thousands of stocks) |
Volatility | Generally lower | Can be slightly higher due to small caps |
Performance patterns | Closely tracks large-cap market | Includes additional growth potential from smaller companies |
Expense ratios | Typically low | Also typically low and comparable |
Overlap and composition
Interestingly, both fund types share significant overlap. Total market index funds include nearly all S&P 500 companies within their holdings. The difference lies in the additional exposure to smaller companies, which may behave differently depending on market conditions.
Historical performance
Historically, returns between the two categories have been very similar. The total market often shows slightly higher long-term performance because of exposure to smaller firms, but this varies depending on the period examined.
According to Morningstar’s long-term index data (as of 2025),2 small- and mid-cap segments have contributed modestly to total market returns over extended periods. However, market cycles can shift over time, so past performance doesn't guarantee future results.
Risk and volatility
Total market index funds may experience more pronounced swings in shorter timeframes due to small-cap stocks. The S&P 500, focused on larger companies, tends to move more steadily. Both still carry market risk, as all equities can fluctuate with economic conditions.
How to invest in index funds with Crypto.com Stocks
While Crypto.com Stocks doesn’t offer mutual funds or index funds directly, you can access US stocks and a wide range of index-tracking Exchange-Traded Funds (ETFs) that follow benchmarks similar to the S&P 500 and total market indexes. All at 0% commission.*
- Sign up on the Crypto.com App and create a Crypto.com Stocks account.
- Verify your account and deposit funds
- Search for index ETFs (or single-name stocks).
- Buy your shares commission-free* – we also offer fractional shares.
FAQs about S&P 500 index funds vs total market index funds
Is the S&P 500 the same as the US stock market?
Not exactly, but it’s often used as a practical proxy for US stocks because it covers about 500 large companies and represents roughly 80% of US market capitalization.1 A total market approach goes further by including mid- and small-cap companies as well.
If total market funds include the S&P 500, what’s the real difference?
Most total market indexes hold the same large companies found in the S&P 500, plus thousands of additional mid- and small-cap stocks. That extra layer can impact performance slightly over certain periods and may affect how the portfolio behaves in different market cycles.
Are index ETFs and index funds the same thing?
No. They can track similar indexes, but they’re structured differently: ETFs trade during market hours like stocks, while traditional index mutual funds typically price once per day at net asset value (NAV.) Both aim to follow an index rather than beat it, but the trading experience and fee structure can differ by product type.
Can I invest in S&P 500 or total market index funds via Crypto.com Stocks?
Crypto.com Stocks offers access to US stocks and many ETFs at 0% commission,* including index-tracking ETFs that follow broad US equity benchmarks. Traditional index or mutual funds aren’t available on the Crypto.com App or Crypto.com Stocks, so ETF-based exposure is the typical route on-platform.
* Other fees may apply.
1 S&P Global, 2025
2 Morningstar, 2025
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All investments involve risk, and not all risks are suitable for every investor. The value of securities may fluctuate and as a result, clients may lose more than their original investment. The past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss in a down market. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing.
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