While the debate surrounding the merits of passive investing has long been settled—as more money continues to reside in index funds than actively managed ones—the argument over what it means to ‘own the market’ has not.

When Vanguard launched the first retail index fund nearly 50 years ago, founder Jack Bogle argued that instead of trying to look for needles in the haystack, investors would be better off owning the whole haystack. Back then, this really meant settling for about 80% of the value of the U.S. haystack, or the 500 largest stocks in the market at a time when there were nearly 5,000 publicly listed companies on U.S. exchanges. But holding the S&P 500 was generally regarded as good enough, since having to trade several thousand securities was costly and operationally challenging.

A lot has changed since then, requiring a reassessment of how passive managers go about choosing their haystacks. For one thing, rebalancing thousands of securities can now be done at the push of a button, and the cost of managing those holdings is not much more expensive than overseeing a 500-stock strategy. Equally significant: The number of publicly traded domestic companies has shrunk considerably. After peaking at more than 7,300 in 1997, the number of listed stocks has dropped to around 3,700, according to the CRSP Count Data. That’s thanks, in part, to mergers, acquisitions, and the rise of venture capital and private equity as alternative sources of funding. This concentration has made capitalization-weighted ‘total stock market indexes’ more top-heavy than ever, as the average U.S. public company has grown in value from $1.8 billion to $7 billion over the past three decades, and the select few “mega-cap” companies are hundreds of times that amount.

The result: Institutional investors, pension plans, retirement plan sponsors, and asset managers who have long since settled the passive vs. active question must ask themselves if they’re choosing the right indexes to accurately reflect the totality of the market.

To determine that, investors must weigh several issues:

Are there arbitrary cutoffs?

Decades ago, when the universe of public stocks was significantly larger and limited computing power made the timely execution of thousands of trades difficult, restricting the market to an arbitrary number of companies was a necessary compromise. Today, indexes don’t need to restrict themselves to a finite count, as there is nothing inherently substantive about 100, 500 or 1,000 count limits. The CRSP US Total Market Index (CRSPTMT), the benchmark that drives the world’s largest mutual fund, the Vanguard Total Stock Market Index Fund, holds the entire investable market and bases membership not on a set number of companies, but on total capitalization to accurately reflect the total market.

Unnecessarily capping constituent counts can create unnecessary trade-offs. For instance, if a new company needs to be added to the index, which existing member needs to come out? And how is that decision made? An example is the Russell 3000 Index, which benchmarks the 3,000 biggest domestic companies based on capitalization. While this captures roughly 98% of the market cap of the U.S. market, it leaves off more than 20% of listed U.S. companies at the smallest end of the cap spectrum.

Are the smallest stocks fully represented?

Microcap companies represent only around 2% of the market value of U.S. equities, so what’s the harm in omitting them? One way to think about it is to consider leading businesses like Netflix, Walmart, and Goldman Sachs, which collectively account for less than 2% of U.S. equity value yet are immensely influential in their respective industries. If an index that purports to represent the total market were to leave those names off, would asset managers tasked with owning the entire market be comfortable with that decision?

Also, many valuable companies went public as micro-caps, including Cisco Systems, Starbucks, and Monster Beverage. Meanwhile consider the potential lost performance for a passive investor whose index fund left off the world’s most valuable company for its first several years as a public security. To be sure, no one can accurately predict which micro-cap will be the next mega-cap, but that’s the whole point of being passive—holding the entire market so you don’t have to pick and choose potential winners. The next big thing is already likely to be in the CRSP US Total Market Index, which includes micro-caps as long as their market capitalization is at least $15 million. And if it isn’t, it will be in our index before it makes its way into other benchmarks.

Are changes to the market reflected promptly?

In the early days of indexing, benchmark providers often delayed reconstituting or recognizing newly public companies as frequent rebalancing was costly. That’s no longer the case today, yet many total market indexes still wait months before reflecting corporation actions.

For example, qualified companies that go public through an IPO or direct listing can join the FT Wilshire 5000 Index in June and December, when the index conducts its semi-annual rebalancing. There is a possibility for ‘fast entry,’ but that is limited to companies whose market value is more than twice the capitalization inclusion requirement for the large-cap segment of the index. The CRSP US Total Market Index, by contrast, adds all IPOs ranging from mega caps to small caps—accounting for 98% of the market—within the first five trading days of the stock’s listing. All other eligible IPOs are added to the benchmark at the next quarterly rebalancing.

Are indexes managed to reflect real world goals and priorities?

CRSP Market Indexes recognize corporate actions quickly because we believe indexes must do so if they want to truly embody the markets they track. Though CRSP was founded at the University of Chicago and is rooted in academic rigor, CRSP Market Indexes are run in a way that reflects how money managers actually invest in the real world.

Ironically, most of the total market indexes that are widely in use today were created 40 or more years ago, before indexing was embraced by investors. The Wilshire 5000, for instance, was created in 1974. The Russell 3000 came into existence in 1984. And the Dow Jones U.S. Total Market Index launched in 1987, when passive was still considered a fringe or niche investment strategy.

Though CRSP was instrumental in helping the first real-world index fund test the feasibility of a passive investment strategy, CRSP US Total Market Index wasn’t launched until 2011, when passive investing had become a mainstream approach. Today, nearly $3 trillion of fund assets are tied to CRSP Market Indexes, including $1.8 trillion linked to CRSP US Total Market Index.

The scale of that adoption underscores the trust investors place in CRSP’s methodology. In an era where index construction is a critical pillar of capital allocation, CRSP’s role in anchoring the most widely held total market stock index fund reinforces its standing as one of the most respected and influential index providers in the world.