Total Stock Market Index Funds – Your weapon of choice for long term investing

By David Samuel

Total stock market index funds give everyday investors a simple, low-cost way to capture the growth of the entire U.S. stock market over decades, without having to guess which individual stocks will win. For most people building long-term wealth, they are a powerful “set it and stay the course” weapon of choice.

What is a total stock market index fund?

A total stock market index fund is a mutual fund that aims to own virtually every publicly traded stock in the U.S. market, from mega-cap giants to tiny small caps. Instead of trying to beat the market, it simply tracks a broad index, such as the CRSP US Total Market Index, seeking to match the market’s overall return.

Because these funds hold thousands of stocks across sectors, they are sometimes called super-broad index funds, offering exposure to nearly the entire investable U.S. equity universe. Many investors use them as the core of a long-term, buy-and-hold strategy focused on gradual wealth accumulation.

Flagship funds in this space include Vanguard’s VTSAX (Vanguard Total Stock Market Index Fund), Fidelity’s FZROX (Fidelity ZERO Total Market Index Fund), and Schwab’s SWTSX (Schwab Total Stock Market Index Fund). All three aim to track broad U.S. stock market indexes at extremely low cost, with FZROX even charging a 0% expense ratio and SWTSX closely shadowing the Dow Jones U.S. Total Stock Market Index.

Because they are broadly diversified, low-fee, and tax-efficient, these funds have historically delivered competitive returns versus most active managers, especially over longer horizons. For an ordinary investor, that combination makes them an ideal foundation for a simple, durable wealth-building plan.

What $10,000 in VTSAX has done over 20 years

To ground this in real numbers, consider a one-time $10,000 investment in VTSAX about 20 years ago. VTSAX has produced an annualized total return in the high single to low double digits over long periods, with some sources estimating roughly 8–10% per year depending on the exact start and end dates and whether you adjust for inflation. Using the midpoint of that range purely for illustration, an average annual return of about 9% over 20 years would have grown a $10,000 investment to roughly $56,000 before taxes and fees, assuming dividends were reinvested.

Actual historical returns vary by start date, and VTSAX has lived through brutal drawdowns—such as the 2008 financial crisis and the 2022 bear market—alongside powerful bull markets. But the broad pattern is clear: staying invested in a low-cost total market fund for two decades has historically rewarded patient investors who were willing to endure volatility rather than trade in and out.

Why they’re so effective long term

Over long periods, the broad stock market has historically trended upward, even though it can be very volatile in the short term. A total market fund lets you participate in that long-term growth while smoothing out the impact of any single company or industry’s misfortune.

Several advantages make them especially well suited for decades-long investing:

• Low costs: Because they are passively managed and simply replicate an index, trading is minimal and expense ratios are typically far lower than active funds, leaving more of your return in your pocket.
• Broad diversification: By spreading your money across thousands of companies, you reduce the risk that one bad stock or sector will derail your plan.
• Competitive performance: Over long horizons, index funds that track the market have tended to outperform most actively managed funds after fees and taxes.
• Tax efficiency: Low turnover and a buy-and-hold style generally result in fewer taxable distributions compared with high-churn active strategies.

“My advice could not be more simple. Put 10% of the cash in short term government bonds, and 90% in a very low cost total market index fund, I suggest Vanguard’s. I believe the long term results from this policy will be superior to those attained by most investors, whether pension funds, institutions or individuals who employ high-fee managers.”

Warren Buffett, in his Berkshire Hathaway 2013 Annual Shareholder Letter

Index funds vs. stock picking and active funds

The academic and real-world evidence has been remarkably consistent: most active managers fail to beat their benchmarks over long periods, especially after accounting for fees and taxes. SPIVA (S&P Indices Versus Active) scorecards over 20 years show that the majority of active equity funds underperform their corresponding index, and the underperformance rate usually rises as the time horizon lengthens.

Even in volatile markets, where stock-pickers are often claimed to have an edge, data indicates passive strategies still deliver better risk-adjusted returns for most investors. And among the small fraction of managers who do outperform, very few repeat that success consistently in subsequent years.

Turning this into your own wealth machine

Total stock market index funds are your best all-weather weapon for long-term investing—but the real magic happens when you combine them with relentless dollar cost averaging and automation. Instead of trying to outsmart the market, you quietly buy a slice of the entire economy every month and let time and compound interest do the heavy lifting.

Dollar cost averaging means you invest a fixed dollar amount at regular intervals—say, on the first of every month—regardless of market headlines or your mood. When prices are high your fixed contribution buys fewer shares, and when prices are low it buys more, naturally smoothing your purchase price over time.

Automation is what makes this work in the real world. You set up an automatic transfer from your bank to your brokerage, then an automatic investment from cash into your chosen index fund(s), and you stop negotiating with yourself every month. This removes two of the biggest enemies of long-term success—procrastination and emotional decision-making—without requiring any special skill.

The beauty of this approach is how little complexity it requires. You open a brokerage account at Vanguard, Fidelity, or Schwab, pick a total market index fund such as VTSAX, FZROX, or SWTSX, and set up an automatic monthly transfer into that fund. You keep going through recessions, elections, bull markets, and scary headlines, letting the combination of diversification, compounding, and disciplined contributions work on your behalf.

Dollar cost averaging into an index fund is the single most boring and most effective wealth building strategy available to an ordinary person. It requires no expertise, no timing and no emotional intelligence. It requires a brokerage account and an automated monthly transfer.

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A few practical guidelines help turn total stock market index funds into an effective long-term wealth machine:

• Make them your core: Many investors build their equity allocation primarily around a total market fund, optionally adding small “satellite” positions (like international stocks or specific sectors) if desired.
• Focus on time in the market: Because even diversified funds can drop sharply in bear markets, the key edge is staying invested through downturns, not trying to time entries and exits.
• Automate contributions: Setting up regular, automated investments helps you smooth out volatility and avoid emotional decision-making during market swings.

In practice, you might simply choose the total market fund available at your preferred brokerage and automate a monthly contribution into it. Over time, you could layer in bond funds and cash reserves around that core, but your primary engine for growth remains the same: a broad U.S. total market index fund bought on autopilot. Over years, and then decades, that quiet, automated process can build a surprisingly large nest egg, even if no single month ever feels exciting. 

Please remember that I’m a personal finance coach, and not a certified financial planner, CPA, or investment advisor. The insights I’m sharing here should not be construed as personalized investment, tax, or financial advice. The information I provide is for general educational and informational purposes only, and you should consult a qualified professional who understands your specific situation before making any investment decisions.

If you’re ready to make progress in your effort to take control of your finances, this is exactly the kind of work done with my coaching clients every day—clarifying priorities, creating a practical plan, and following through on it. If you’d like support with your own situation, you’re welcome to reach out anytime at david@everydayfinancecoach.com