The index is reconstituted yearly by the committee often using those soft qualitative factors and a few stocks are added or eliminated, with major impact on those stocks popularity. The other thing that sets the S&P 500 apart from other broad market indexes and from the Schwab Dividend Equity ETF is that the stocks found in the S&P 500 index are selected by a human committee, whose goal is to select the stocks that are best representative of all the sectors that make up the total U.S. It eliminates unicorn IPOs, meme stocks, and other speculative investments of the kind you will find in other broad market indexes, like the Vanguard Total Stock Market ETF ( VTI) that include almost every stock traded on US exchanges. The requirement that stocks chosen for the S&P 500 have a history of profitability sets it apart from other broad market indexes. stock market including stocks from all sectors and styles. The methodology makes it clear that the point of the S&P 500 is to mirror, in a selective fashion, the makeup of large cap segment of the entire U.S. The S&P 500 includes REITs, which many other large cap indexes, including the one associated from which SCHD's stocks are drawn, exclude. S&P Global has probably removed a specific number from its S&P 500 brochure because the 2022 bear market shrank the market cap of many of its smallest holdings which still remain in the index. As recently as September of 2021, when I last wrote about it, that market cap was listed in the same document as being $11.8 Billion. It is interesting to note that until very recently, S&P Global gave a specific number for "market capitalization requirements." This number had been growing by a billion dollars or so every six months over the past five years as the market cap of its constituents swelled with the Bull Market. company, meet market capitalization requirements, be highly liquid, have a public float of at least 10% of its shares outstanding, and its most recent quarter's earnings and the sum of its trailing four consecutive quarters' earnings must be positive. ![]() To be eligible for S&P 500 index inclusion, a company should be a U.S. S&P Global, the company that selects and maintains the S&P 500 index describes VOO's index as follows: VOO and SPY's performance are extremely similar, but because VOO has a lower expense ratio than SPY, VOO's long term performance is slightly better than that of SPY. So we know more about how VOO has performed in the past under different market conditions than we do about any other fund or ETF.Īs its name suggests, VOO tracks the S&P 500 index, which is the same index tracked by the SPDR S&P 500 Trust ETF ( SPY). ![]() The earliest share class of the Vanguard 500 Index Fund started trading 46 years ago, in August of 1976 and has traded continuously since then. Though VOO only started trading in September of 2010, it is actually the ETF share class of a much larger, older mutual fund, the Vanguard 500 Index Fund ( VFIAX ), which was the first index fund to ever track the S&P 500. ![]() How Are SCHD And VOO Different? A Look At How They Are Constructed VOO Tracks Large Cap Stocks from All Sectors with a History of Profitability, Chosen by a Human Committee So what I'm going to do in this article is walk you through the process I follow when faced with making a choice like this one, which involves asking a series of questions examining their answers and following up on the questions those answers lead to. It's a very good question and one for which I had no immediate answer as there is much to be said for both. Dividend Equity ETF ( NYSEARCA: SCHD) or the Vanguard S&P 500 ETF ( NYSEARCA: VOO). ![]() I was recently asked for my opinion on which was a better choice for investing new money, the Schwab U.S.
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