S & amp;P 500 index fund alternatives

Index investors should consider funds that cast a wider net.
NEW YORK (AP) -- If you've got better things to do than pore over the finer points of your stock portfolio, and you don't care to study the performance records and investing styles of mutual fund managers, chances are you've invested in an equity index fund.
Good for you. These passively managed baskets of stock will give you quick, easy and inexpensive exposure to a broad swath of the market, and more often than not, provide better returns than actively managed funds, which have to charge higher fees so they can pay their stock-pickers -- who aren't always right. An index can be a great first fund for beginners, and many people, including some very astute investors, rely on them exclusively. But not all indexes are the same, and depending on which one you hold, your stake in the market might be more limited than you realize.
About a third of the $7.4 trillion invested in the nation's mutual funds is held in passively managed index funds, and they are growing more popular all the time. This is reflected in the rising asset levels of exchange-traded funds, which track indexes but differ from mutual funds in that they are traded like stocks.
At the top
The biggest fish in the indexing world is the Standard & amp; Poor's 500, which many investors consider to be the best overall snapshot of the U.S. equity market. Some $1.1 trillion in passively managed assets are pegged to it. It's replicated by an ETF sold through iShares and dozens of mutual funds, including the Vanguard 500, now the largest retail mutual fund in the nation, with assets topping $96 billion.
If all of your stock exposure came from the S & amp;P 500, however, you'd be ignoring huge parts of the market, including thousands of small and microcap stocks, which led Wall Street's most recent rally. You'd also have to wait years before some up-and-coming companies met the standards of S & amp;P's index committee, which reconstitutes the list on an as-needed basis using a variety of factors, including liquidity, price and market-cap -- typically $4 billion or higher.
"The biggest mistake new investors make, besides just listening to someone who says they can pick hot stocks for you, is thinking that indexing equals an S & amp;P 500 index fund," said Tom Coyne, editor of the Index Investor newsletter. "I think you always start with the broadest-based index, and if you're going to tilt your portfolio away from that, fine, but make sure you're doing it for a reason."
Some suggestions
There are many ways you could broaden your equity exposure beyond the large-cap focused S & amp;P 500. You could buy funds that track the S & amp;P MidCap 400 and S & amp;P SmallCap 600 -- which are also selected by the S & amp;P committee. For more sophisticated investors, this might be appealing, because you can raise or lower your exposure to different market caps depending on your strategy. Or you could get exposure to all three by investing in a fund that tracks the S & amp;P 1500.
If you don't care for the idea of having a committee of people choose which stocks you own, you might like the indexes offered by the Russell Investment Group. Russell tracks 3,000 domestic stocks, and simply lists them from largest to smallest. The Russell 1000 is a large-cap index, and the Russell 2000 is a widely held small-cap index. You could own both by investing in the Russell 3000.
If neither of these sound big enough to you, then you should take a look at the Dow Jones Wilshire 5000, the broadest possible slice of domestic stocks you can buy.
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