To be precise, standard cap-weighted S&P 500 index funds and exchange traded funds hold 503 stocks. Sure, that sounds like a lot and it is from a large-cap perspective and that’s what the S&P 500 is: a large-cap benchmark.
These days, a US-listed company needs a minimum market capitalization of $22 billion to enter the S&P 500. A mid-cap, let alone small-cap gauge this is not. The S&P 500 isn’t limiting per se, but its requirements for entry leave ample room for domestic equity market blanks to be filled in. Advisors and investors can efficiently fill those holes with what are known as extended market funds.
Extended market funds, particularly in ETF form, come in a variety of iterations. Some even focus on dividends while others are actively managed, but the commonalities are focuses on small- and mid-cap stocks (SMID), obviously, and large rosters. Some of the passive funds in this category contain thousands of stocks.
For example, the Vanguard Extended Market ETF (VXF), one of the most popular funds in the category, holds 3,426 stocks, making it an ideal complement to positions in S&P 500 index funds or ETFs.
VXF Advantages
VXF clearly has an audience. In ETF form, it has nearly $23 billion in assets under management and across its various share classes, that figure swells to $78. 9 billion, confirming that advisors see value in the extended market strategy.
The Vanguard ETF follows the S&P Completion Index, which is a proving ground of sorts for future inclusion in the S&P 500. As highlighted by VXF’s roster size, there’s an expansive universe of domestic SMID name and that can make it difficult for some extended market strategies to control for quality. In other words, 3,426 SMID names is a lot and at that number, there’s bound to be a few dogs in the universe, but VXF has some avenues for mitigating the effect of lower quality fare.
“The portfolio diversifies well, mitigating risks from its low-quality bent. It stows 10% in its top 10 holdings, or 5% less than peers in the mid-blend Morningstar Category as of July 2025. It also holds nearly 10 times as many stocks,” notes Brendan McCann of Morningstar.
Indeed, VXF is diverse and that could be a selling point at a time when the top five holdings in the S&P 500 combine for approximately 28% of that index’s weight. Conversely, VXF’s top 10 holdings combine for approximately 10% of the ETF.
Other VXF Perks
VXF offers active investors/traders some perks, too, including it being a valid idea for getting a sense on which stocks will be next added to the S&P 500. Last Friday, S&P Dow Jones Indices said AppLovin (NASDAQ: APP) and Robinhood Markets (NASDAQ: HOOD), two of VXF’s top five holdings, will join the S&P 500 later this month.
Other VXF top holdings, including Strategy (NASDAQ: MSTR) and FanDuel owner Flutter Entertainment (NYSE: FLUT), are seen as credible additions to the S&P 500 over the near- to medium-term. Plus, for investors that handles the volatility, VXF has been a better bet than many rival mid-cap blend funds.
“The fund has had some unruly performance in recent years. The ETF outpaced the mid-blend category by 1. 49 percentage points annualized from its inception in 2001 through August 2025. The fund clocked higher volatility than its peers due to its small-cap and low-quality tilts,” adds McCann.
