1/17/2024 0 Comments Dia etf vs sp etfOne reason could be the fact that in earlier days the DJIA was only composed of stocks that were traded on the New York Stock Exchange when Apple Inc was traded on the NASDAQ. Everybody's favorite - Apple Inc, is not included in the portfolio of the Dow. Given this fact, one could argue that the S&P 500 is a better indicator of sector as well as broad based trends in the U.S. since it consists of a sample size which is 16.67 times that of the DJIA. On the flip side, the S&P 500 gives a more holistic picture of the economic trends in the U.S. The components of DJIA include only those stocks which are considered to be leaders in their respective industries since the index is composed of a small sample of 30 stocks. Therefore, a 10% change in a $100 stock and a 10% change in a $50 stock will be dependent on their number of shares outstanding (Note: Market capitalization equals price per share multiplied by the number of shares outstanding) (read Five Best Performing ETFs (So Far) in 2012 ). On the contrary, the S&P 500 averages out the percentage change of each component on its portfolio as it employs a market capitalization weighted technique. For example, the index value will be more sensitive to a 10% change in a $100, than a 10% change in a $50 stock, regardless of how big the companies actually are. Therefore the index is more biased towards stocks with a higher share prices like IBM, instead of low price ones like Alcoa (AA). This implies that companies with higher market price would receive a more superior weighting than a company with a lower price. However, presently the index construction employs a Dow Divisor to incorporate management based changes such as stock splits and dividend payouts (see 12 Ways to Earn High Yields with ETFs ). equity market, contrary to its counterpart S&P 500 which is a market capitalization weighted index and consists of 500 stocks.Įarlier, the value of DJIA used to be computed on a simple average basis by adding the price of each component and dividing it by the number of components. The DJIA is a price weighted index composed of 30 large cap stocks in the U.S. Weighting Methodology and Index Construction The following section discusses some of the key differences: However, before discussing the pros and cons of each of these ETFs it is important to understand the differences between the two. The SPDR S&P 500 ETF ( SPY ) and the SPDR Dow Jones Industrial Average ETF ( DIA ) are two such products by State Street Global Advisors which track the S&P 500 and the DJIA, respectively. This benchmark consists of a much biggest basket of stocks and utilizes a different weighting system in order to track American stock performance.Įither way, investors have a great deal of options including taking an ETF approach for the benchmarks. That said, yield does not play a big role in the portfolio’s overall ability to deliver strong risk-adjusted performance relative to the MSCI ACWI ex USA Value Index.Beyond the DJIA, investors also have the S&P 500, which some argue is actually the better benchmark for stock market performance. As of October 2023, its trailing 12-month dividend yield stood at roughly 3.9%, placing it on par with its Morningstar Category index. Despite looking for stocks with higher dividend yields, it does not provide a higher yield than the value side of the market. On average, its profitability has been consistently higher than the MSCI ACWI ex USA Value Index, and it has tended to incur less of the market’s risk. The resulting portfolio favors stable companies that are likely to maintain their dividend payments. The fund also promotes diversification by limiting single stock weightings to 4%, sector weightings to 15%, and emerging markets to 15%. It focuses on the top names that meet these criteria while incorporating some buffer rules to keep turnover reasonable. ![]() It excludes REITs and searches for stocks with higher dividend yields, greater profitability and free cash flow, lower volatility, and a long history of regular cash dividend payments. This bogy starts with stocks in the Dow Jones Global ex US Large-Cap and Dow Jones Global ex US Mid-Cap indexes, and refines those cohorts down to 100 stocks. This exchange-traded fund tracks the Dow Jones International Dividend 100 Index. Schwab International Dividend Equity ETF’s SCHY focus on the market’s more profitable and stable stocks, and its low fee, should lead to better risk-adjusted performance than the MSCI ACWI ex USA Value Index. Key Morningstar Metrics for Schwab International Dividend Equity ETF
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