Ben Gran, The Motley Fool
5 min read
If you’re trying to follow the latest stock market news, the Dow Jones Industrial Average is one of the most common benchmarks. Known as the Dow, the DJIA is a collection of 30 U.S. stocks from a range of industries. The components of the Dow are generally considered to be “blue chip” stocks of large companies that are important to the overall U.S. economy, and their performance is a widely used barometer of the stock market.
If you want an easy way to buy the Dow, you might want to consider investing in the SPDR Dow Jones Industrial Average ETF Trust (NYSEMKT: DIA). This fund holds all 30 stocks from the Dow and charges a modest expense ratio of 0.16%. But the Dow doesn’t always beat the market. Over longer-term timeframes of the past five and 10 years, this Dow ETF has underperformed the S&P 500 index.
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Instead of buying the Dow in the form of the 30 stocks of the DJIA, a smarter choice for long-term investors might be the Schwab U.S. Broad Market ETF (NYSEMKT: SCHB). This is one of the best total stock market ETFs. Instead of only 30 stocks, the Schwab ETF lets you track the performance of the 2,500 largest publicly traded U.S. companies that make up the entire Dow Jones U.S. Broad Stock Market Index.
Let’s look at these two U.S. stock ETFs and see if the Schwab U.S. Broad Market ETF is a better choice for your money than buying the Dow.
SPDR Dow Jones Industrial Average ETF Trust: 28 years of 9.13% annualized returns
Buying blue chip stocks can be a smart strategy. Those companies tend to be stable and steadily profitable and pay good dividends. The SPDR Dow Jones Industrial Average ETF owns a portfolio of 30 well-known U.S. companies. Its top 10 stock holdings include major names like Goldman Sachs (11.6% of the fund), Microsoft (4.4%), Alphabet Class A shares (4.1%), Visa (3.99%), and Home Depot (3.98%).
This Dow Jones ETF has been around since January 1998. In the 28 years since its inception, the SPDR Dow Jones Industrial Average ETF Trust has delivered average annual returns (by net asset value) of 9.13%. That’s a solid return, but it has slightly underperformed the S&P 500 index since its inception, and in the past five years.
The Schwab U.S. Broad Market ETF: 2,354 stocks, 16 years of 14.54% annualized returns
