Wilshire 5000

Definition

The Wilshire 5000, also known as the Wilshire 5000 Total Market Index (TMWX), is a stock market index that measures the performance of all U.S.-headquartered equity securities with readily available price data. It is designed to track the overall performance of the U.S. equity market and includes almost all publicly traded companies headquartered in the United States. This makes it one of the most comprehensive stock indexes in the world.

Examples

Individual Investors: Individual investors often use the Wilshire 5000 to gauge the overall health of the stock market, making it easier to assess diversified investments.
Financial Analysts: Financial analysts refer to the performance of the Wilshire 5000 to provide guidance and recommendations to clients regarding market conditions and investment strategies.
Mutual Funds: Many mutual funds aim to replicate the performance of the Wilshire 5000 due to its broad market representation.

Frequently Asked Questions (FAQs)

What is the purpose of the Wilshire 5000?

The primary purpose of the Wilshire 5000 is to provide a comprehensive, broad-based measure of the United States stock market and its performance.

How often is the Wilshire 5000 updated?

The Wilshire 5000 is updated continuously during trading hours to reflect real-time market movements.

Why is it called the “Wilshire 5000” if it doesn’t always contain exactly 5,000 stocks?

The name “Wilshire 5000” is historical. The index originally contained approximately 5,000 stocks, but the number can fluctuate due to changes in the market, such as companies being added or removed from public trading.

Who maintains the Wilshire 5000?

The Wilshire 5000 is maintained by Wilshire Associates, a leading global investment management and consulting firm.

How can investors use the Wilshire 5000?

Investors can use the Wilshire 5000 to gauge overall market trends, compare individual stock performance to the broader market, and make informed decisions about asset allocation.

S&P 500: A stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States.
NASDAQ Composite: An index of more than 3,000 common equities and similar securities listed on the NASDAQ stock market.
Dow Jones Industrial Average (DJIA): A stock market index that measures the stock performance of 30 large, publicly-owned companies in the United States.
Russell 3000: An index measuring the performance of the 3,000 largest publicly-traded companies in the U.S.

Online References

Suggested Books for Further Studies

“The Little Book of Common Sense Investing” by John C. Bogle - A classic that covers the importance of investing in broad market indexes like the Wilshire 5000.
“A Random Walk Down Wall Street” by Burton G. Malkiel - Discusses various investment strategies, including the use of comprehensive indexes.
“Common Stocks and Uncommon Profits” by Philip Fisher - Useful for understanding stock market fundamentals and the role of broad-based indexes.

Fundamentals of Wilshire 5000: Investment Basics Quiz

### What does the Wilshire 5000 track? - [ ] Only the top 100 stocks in the U.S. market. - [x] All U.S.-headquartered equity securities with readily available price data. - [ ] Only technology stocks listed in the U.S. - [ ] Only stocks listed on the NASDAQ. > **Explanation:** The Wilshire 5000 tracks all U.S.-headquartered equity securities with readily available price data, making it a comprehensive barometer of the U.S. stock market's performance. ### Which firm maintains the Wilshire 5000? - [x] Wilshire Associates - [ ] Standard & Poor's - [ ] Dow Jones & Company - [ ] Bloomberg L.P. > **Explanation:** Wilshire Associates is the firm that maintains the Wilshire 5000 index. ### What is a key characteristic of the Wilshire 5000 index? - [ ] It only includes blue-chip stocks. - [x] It includes almost all publicly traded companies headquartered in the United States. - [ ] It includes only stocks from the technology sector. - [ ] It follows only S&P 500 companies. > **Explanation:** The key characteristic of the Wilshire 5000 index is that it includes almost all publicly traded companies headquartered in the U.S., thus serving as a broad measure of the stock market. ### Why isn't the number of stocks in the Wilshire 5000 exactly 5000? - [ ] Due to fluctuation in market prices. - [x] Due to market changes such as new listings and delistings of companies. - [ ] Due to changes in investor sentiment. - [ ] Because it does not cover small-cap stocks. > **Explanation:** The number of stocks in the Wilshire 5000 can fluctuate because of market changes such as new listings and delistings of companies. ### Can the Wilshire 5000 be used to measure overall U.S. market performance? - [x] Yes - [ ] No - [ ] It measures only tech sector performance. - [ ] It measures only the financial sector. > **Explanation:** The Wilshire 5000 can indeed be used to measure the overall performance of the U.S. stock market due to its comprehensive nature. ### Which type of investor might use the Wilshire 5000? - [ ] Only day traders. - [ ] Only fixed-income investors. - [ ] Only real estate investors. - [x] Broad market equity investors. > **Explanation:** Broad market equity investors would use the Wilshire 5000 to gauge overall market trends and make informed decisions about diversified investments. ### What is the Wilshire 5000 also known as? - [ ] Wilshire Total Equity Index - [ ] Wilshire 4000 Index - [ ] Total Stock Market Index - [x] Wilshire 5000 Total Market Index > **Explanation:** The Wilshire 5000 is also known as the Wilshire 5000 Total Market Index, reflecting its comprehensive coverage of the U.S. stock market. ### Which index is NOT a broad-based market index like the Wilshire 5000? - [ ] The Dow Jones Industrial Average - [ ] The S&P 500 - [ ] The NASDAQ Composite - [x] The Russell 2000 > **Explanation:** The Dow Jones Industrial Average is not as broad-based as the Wilshire 5000, which includes nearly all publicly traded U.S. companies, while the Dow tracks only 30 large cap stocks. ### How often is the Wilshire 5000 updated? - [x] Continuously during trading hours - [ ] Weekly - [ ] Monthly - [ ] Annually > **Explanation:** The Wilshire 5000 is continuously updated during trading hours to reflect real-time market developments. ### Why might a mutual fund aim to replicate the performance of the Wilshire 5000? - [x] Because it represents the entire U.S. equity market. - [ ] Because it only tracks blue-chip stocks. - [ ] Because it's easier to track fewer stocks. - [ ] Because it follows global market trends. > **Explanation:** A mutual fund might aim to replicate the performance of the Wilshire 5000 because it represents the entire U.S. equity market, offering comprehensive exposure to U.S. stocks.

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