The Wilshire 5000 is a cap-weighted index, meaning that the largest companies are weighted the heaviest. The only criteria a stock has to meet to be included in the index is to trade on a U.S. exchange. There are no cutoff points concerning size, trading volume or share value. There are no nods toward certain sectors, either. [More on Indexing Here.]

“We didn’t create these indexes to fit some marketing spiel or to be publicly traded; we created these indexes to serve as benchmarks” so people could see how they’re doing, as well as to get a sense of how the market is looking.

And 5000 may be in the name, but there aren’t necessarily 5000 stocks in the index. Waid says that when they were building the index in 1974, there were close to 5000 securities trading, so they rounded up and the name stuck as the number of stocks in the United States ballooned to 7,600 in 1998 and shrank down to 4,100 today. Companies are added monthly.

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Read the disclaimer, as Tom Lydon is a board member of Rydex|SGI.  Both Claymore and Rydex|SGIO are owned by Guggenheim Partners.

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