Quick Read
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Broader U.S. exposure: VXF owns virtually every publicly traded U.S. stock outside the S&P 500, providing broad exposure to thousands of mid- and small-cap companies.
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Flexible portfolio tool: Pairing VXF with VOO allows investors to precisely customize their exposure between large-cap stocks and the rest of the U.S. equity market.
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Low-cost diversification: A 0.05% expense ratio, broad diversification, and the ETF structure's tax efficiency make VXF an inexpensive way to complement an S&P 500 portfolio.
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One of the most common misconceptions I hear about the S&P 500 is that it's simply "the largest 500 U.S. stocks." That's not quite accurate. The index is far more curated than many investors realize. In addition to meeting minimum requirements for market capitalization, liquidity, public float, and earnings consistency, companies must ultimately be approved by the S&P Index Committee before they are added. Likewise, the committee also decides when constituents are removed.
That means the S&P 500 excludes a huge portion of the U.S. stock market. Thousands of mid-cap and small-cap companies never make it into the index, even though many are profitable, publicly traded businesses. In certain market environments, these overlooked stocks can outperform their large-cap counterparts. That's exactly what's happened so far in 2026.
As of July 31, 2026, the Vanguard Extended Market ETF (VXF)has gained 13.55% year to date, compared with 10.16% for the Vanguard S&P 500 ETF (VOO). With the Magnificent Seven's dominance fading and investors rotating back toward mid- and small-cap companies, the broader U.S. market has quietly begun to catch up.
Many investors seeking this exposure gravitate toward dedicated small-cap or mid-cap ETFs. Personally, I think that overlooks one of the most elegant solutions available. VXF provides exposure to virtually everything the S&P 500 leaves behind, and it does so at an exceptionally low cost. Here's why.
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What Is VXF?
VFXpassively tracks the S&P Completion Index, a unique benchmark designed to capture virtually the entire U.S. equity market outside of the S&P 500. In practice, that means VXF owns nearly every publicly traded U.S. company that isn't already included in the large-cap benchmark. The result is an exceptionally broad portfolio of 3,372 holdingswith a clear mid-cap tilt. The median market capitalization currently sits at approximately $9.3 billion, compared with roughly $455 billionfor the S&P 500.
The ETF still uses market-cap weighting, so the largest companies outside the S&P 500 naturally receive the biggest allocations. One interesting example is Space Exploration Technologies Corp. (SpaceX), which currently represents approximately 1.14%of the portfolio. Despite being one of the world's largest companies by private-market valuation, it isn't part of the S&P 500 because it doesn't satisfy the index's earnings seasoning requirements. As a result, it finds its way into VXF instead.
Why I Like VXF
Compared with many older actively managed mutual funds, VXF is remarkably tax efficient despite posting an annual portfolio turnover rate of 11.7%. Like most ETFs, it benefits from the in-kind creation and redemption mechanism, allowing portfolio managers to exchange securities directly with authorized participants rather than selling appreciated holdings. That greatly reduces the likelihood of distributing taxable capital gains to shareholders at year end.
The fees are also exceptionally competitive. Despite giving investors exposure to virtually the entire U.S. market outside the S&P 500, VXF charges an expense ratio of just 0.05%, only marginally higher than VOO. One of my favorite use cases is pairing VXF alongside VOO instead of simply buying a total U.S. market ETF. Doing so lets you precisely control your allocation between large-cap stocks and the rest of the market.
If you want to overweight mid-caps and small-caps relative to the traditional market-cap weights while still keeping the S&P 500 as your core holding, VXF provides a clean and inexpensive way to do it without abandoning broad diversification.
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