Investing - Theory, News & General • Is there an index fund tracking Dow Jones Industrial Average?

Theory does not say the DOW should under- or overperform the S&P 500. My comment had nothing to do with the performance of the index. What makes the DJIA a bad index is that it's weighted by the share price of the underlying companies, rather than by market cap. That's how a 9-year-old would build a stock market index. Goldman counts more than Microsoft in the DJIA simply because of its higher NAV, even though Microsoft's market cap is more than 20X that of GS and thus has far more impact on the stock market. It's That just makes no sense whatsoever, and there's no real reason to accept the DJIA's limitations as an index.

And no, they are not "almost identical in performance" - the S&P 500 is up almost 9% this year, the DJIA is up about 3%.

You are just proving my point. All of your "theory" says that the DOW is a terrible index. Yet none of that means anything in practice. Below you can see the 24 years of the DOW vs the S&P 500 VFIAX since inception. Over those 24 years the DOW returned 7.94% and the S&P 500 7.92%.

And that chart looks very different if you choose different dates, e.g. 2018 to 2024.

Regardless, the point of an index is not to outperform or underperform. It's to capture the performance, movements, and allocations of the overall stock market, or a segment of it. And a cap-weighted index of 500 companies is indisputably better at doing that than a price-weighted index of 30 companies, which is why there are a ton of S&P 500 index funds and almost no DJIA index funds, which is what OP asked about.

Of course an so500 index will track the sp better than a Shia index. That does not make it better. Turning that illogic around means a SP500 index fund is inferior to DIA because the SP500 one will not track DJIA as well as DIA. Yours is a tautological argument. You might as well say blue is a better color than red because it appears more blue.

Please take another stab at reading comprehension and spelling. I didn't say an S&P 500 index fund tracks the S&P 500 index better. I said the S&P 500 index better reflects the total U.S. market than the DJIA.

Statistics: Posted by LotsaGray — Wed May 08, 2024 11:03 am — Replies 61 — Views 4558