Why shouldn't there be lots of kinds of indexes? There are certainly ones like you describe. In practice it just doesn't matter, the large companies are so much

Why shouldn't there be lots of kinds of indexes? There are certainly ones like you describe. In practice it just doesn't matter, the large companies are so much larger that adding even thousands of tiny companies doesn't move the needle. VTI is Vanguard's total stock market ETF which works like what you suggest. It has 3,606 stocks, year-to-date it's up 18.82%. Compare that to Vanguard's S&P 500 ETF VOO which is up 19.03%. When a company hits its stride and is large enough to really make it difference it will join the S&P 500. I guess if there were a lot more than 500 companies that you should own there would be a problem, but we're not there currently. If you want exposure to small caps it's much more efficient to own an index of small caps. Their performance has seriously lagged in recent times though, so just owning VOO has been the way to go for a long time.