NEW YORK (CNN/Money) - I'm interested in investing in either an S&P 500 index fund or a Wilshire 5000 index fund as a buy-and-hold approach with disciplined monthly purchases. I've recently read some articles that say the S&P 500 is the better choice because it outperforms the Wilshire 5000 over the long haul. But I've seen other articles that recommend the Wilshire 5000. Which is better and is either a good choice for an IRA or Roth IRA?

-- Kevin, Rahway, New Jersey

I think a little explanation of the differences between the S&P 500 index and the Wilshire 5000 index is a good way to begin answering your question. The S&P 500 is an index of large-company stocks, by which I mean stocks that have the big, though not necessarily the biggest, market values. Not surprisingly, there are 500 of these big stocks in the index, covering all the major economic sectors and industries.

Periodically, the S&P index committee drops some companies from the index -- perhaps because they're no longer considered a leading company in their industry -- and adding others as their star rises. So while the S&P 500 certainly focuses on very large companies, there's a lot of subjectivity as to which ones get in and whether or not they stay. The index is "market-cap weighted," which means that the each stock is held in proportion to its market value. So the fortunes of the largest stocks in the index pretty much determine the performance of the index overall.

The Wilshire 5000, by contrast, is an index made up of virtually every publicly-traded stock in the U.S., large, medium-sized, small and minuscule. Surprisingly, it doesn't have 5000 stocks. It's called the Wilshire 5000 because that was the number of stocks in the index when it was created in 1974. That number has gone up over the years as more companies have been founded and more have issued stock. Today, the index contains more than 6,500 issues, although that number changes as some companies go bankrupt and others go public. Like the S&P 500, the Wilshire 5000 is market-cap weighted, which means the large companies pretty much determine the index's performance.  

So which is better for a buy-and-hold approach? Well, the fact is that the performance of both indexes is pretty similar, although the S&P 500 tends to do better during times when large-company stocks excel and the Wilshire 5000 tends to outperform when the small fry generate better returns than the behemoths.

Over very long stretches, both indexes usually post returns that are pretty close. Over the 15 years through Dec. 31, 2001, for example, the S&P 500 returned an annualized 13.7 percent, while the Wilshire 5000 gained an annualized 13.0 percent. Large-cap stocks had some major runs during that period, which accounts for the S&P's higher return. I'm sure you could easily find 15-year periods during which the Wilshire had the higher return, although in general I would expect their long-term performances to be pretty close over periods of 10 years or more.

That said, however, if I were going to hold only one, I'd probably go with the Wilshire 5000, simply because it would allow me to track the entire U.S. stock market with one portfolio. If I hold only the S&P 500, I'm pretty much throwing in my lot with large companies only -- and there are times when small-fry shares deliver the better gains.

That's not to say I would never own the S&P 500 index. But if I did own it, I'd also want to make sure I got some small stock exposure, perhaps by buying a small-cap index fund based on an index such as the Russell 2000.

Oh, one more thing. The main idea with an IRA and Roth IRA is to find investments that can generate high returns so you can make the most of tax-deferred (in the case of the traditional IRA) or tax-free compounding of your money. Since both these indexes essentially give you the return of the overall U.S. stock market, I consider both reasonable choices for an IRA or Roth IRA, and for that matter, non-IRA accounts.