The s&p 500 is worse In my opinion. They make it sound like it is the top 500 public companies in the us. Which is not the case. They have group that picks them based on a bunch dumb rules. I like the total stock market index's. If you have people picking what goes into the index they why bother just buy active managed index funds.
There's a published methodology on how the S&P 500 works. It's quite predictable, as this is a desirable feature on any index. While it's true that there's a human index committee that meets, it's mostly for tie breakers. They strive for diversity and typically lean on precedence to make their picks.
Also, almost nobody thinks the S&P5 is worse than the Dow. I'm not sure how you can back that up.
The S&P 500 isn't ideal, but it's much better than the Dow. Both indices are a selection of companies, but the Dow is smaller which leaves much more room for judgment calls. Additionally, that the Dow is weighted by share price is completely ridiculous.
(If you actually want to index, though, a total market fund makes much more sense)
Yea true. But most people I think know the Dow is kinda of BS handpicked list. Where the S&P 500 pretends it is the top public 500 companies in the USA. Just always kinda bother me how they advertise it. Most of them will become useless anyways. Firms are going to be using in house index so they don't have to pay the fees. Fidelity is doing this with there free index funds.
The simple premise that S&P500 weights its components based on market cap already puts it lightyears ahead of DJIA.
Also including 500 big companies is much more reasonable than including just 30.
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People lately criticize S&P committee for the rule that a company needs to report 4 consecutive profitable quarters in a row to be included. Thanks to this they've missed the boat on Tesla and they had to eventually include it as the 8th largest component.
Someone on this forum joked that they should amend the rule to say: A company needs to report 4 consecutive profitable quarters in a row and the CEO name must not rhyme with melon tusk.
There are funds that are more diversified than funds tracking S&P (e.g. $VOO tracks S&P 500). $VTI should represent the total US market. $VWRL should represent the total worldwide market.
Not sure about “better to own” though - that depends on your risk profile. Of course both of them underperformed S&P 500 in the recent history.
