Why not Nasdaq and Dow?

[ChinchillaWhiplash]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

[smalliebigs]

Superior for how long?

It's only been higher since 2020s due to C19 and the tech boom.

[grabiner]

The problem with the Nasdaq and Dow indexes is that they don't represent an investment characteristic. You might want to invest in value stocks, or small-cap stocks, or technology stocks; these are investment characteristics, and there are funds which track them. But there is no reason to prefer a corporation traded on the Nasdaq over a similar corporation traded on the NYSE. If you want the technology bias of the Nasdaq index, you can buy a technology fund.

The Dow is a selection of 30 of the largest stocks, which has a slight value bias. Again, there is no particular reason to prefer a stock because it is listed in the Dow. And the Dow is also a badly designed index for investment; it holds an equal number of shares of each stock, regardless of the share price. If a stock splits 2:1 so that an old share worth $80 becomes two new shares worth $40, nothing of economic significance happened but the stock doubled its weight in the Dow.

[jebmke]

It would help of you publish your data - maybe graphical comparison over 40-50 year period.

[Northern Flicker]

The problem with the Nasdaq and Dow indexes is that they don't represent an investment characteristic.

Right. The question to ask is: what asset class are you implementing?

Start with an asset allocation made up of asset classes, then find implementations of the asset classes.

[nisiprius]

There are a gazillion theories of the form "this restricted category of stocks is Just Plain Better than the market as a whole."

There exists a mathematical theory in financial economics that under a set of assumptions that are not realistic, but aren't crazy either, the market portfolio--the set of all stocks in the stock market--is "mean-variance optimum," which may or may not an optimum in terms of what you want. But the theory does exist.

No such theory exists for the Dow Jones Industrial Average, or the Nasdaq.

Also, you are ignoring risk. By measurements of risk-adjusted return, QQQ has not actually done any better than Total Stock.

Finally, John C. Bogle did not advocate "index funds" in the sense of any old index fund, just as long as it tracks some index, an index, any index. Here's what he did say:

Source

...the original idea of the index fund—own the entire U.S. stock market, own it at low cost, hang on to it forever—has been, to put it bluntly, bastardized.... Why? Because the term “index fund,” like the term “hedge fund,” now means pretty much whatever we want it to mean.

In addition to 109 index funds now linked to a relative handful of broad market indexes (S&P 500, Wilshire Total Market, Russell 3000), there are 224 index funds linked to narrow market indexes— small cap-growth stocks, technology stocks, even South Korean stocks—funds that seem to be bought to be sold.

The first index mutual fund, the Vanguard 500 index, was intended to approximate the entire U.S. stock market, and later the Total Stock Market index fund was added to approximate it even more closely.

John C. Bogle advocated "own the entire U.S. stock market, own it at low cost, hang on to it forever."

[ChinchillaWhiplash]

It is curious that the financial media uses both the Dow and Nasdaq as a gauge of overall market conditions along with the SP500. How much of the overall market cap are in these indexes? Why do these indexes seem to hold so much weight in reference to the overall market? Seems the SP500 should be good enough and tracks pretty close to the market as a whole and should be the only index that matters for tracking market moves.

[ttboy]

S&P500 is cap weighted. Dow is price weighted. I don't even look at the Dow. Dow is for amateurs.

[nisiprius]

The Dow Jones Industrial Average has the great virtue of being calculated consistently, in exactly the same way, since 1896. It's sort of garbage, but the DJIA for 2023 is exactly comparable to the DJIA for 1923.

You can't say that of any other index. The S&P 500 only began in 1957, and was preceded by somewhat varying calculations of varying numbers of stocks.

The DJIA is rather like the Blue Hills Weather Observatory. It gathers weather data using the same mercury-filled barometers it has always used, and measures the barometric pressure in inches... and the same for all of the other data it collects. Because it is felt that much of the value of the record is in the fact that it is completely continuous and completely consistent.

[arcticpineapplecorp.]

Planet money don't believe the hype

[Northern Flicker]

It is curious that the financial media uses both the Dow and Nasdaq as a gauge of overall market conditions along with the SP500.

Yes, it is highly annoying that organizations like NPR report how the Dow and NASDAQ did when reporting on the market, as if they are providing good information about the market.

[HawkeyePierce]

The Nasdaq and Dow are bigger numbers. That lets the media say "The Dow fell by 200 points" which sounds much more dramatic than "The Dow fell by 0.6%".

[watchnerd]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Check your data.

Nasdaq was in the toilet for the first decade of the 21st century.

[PoorHomieQuan]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Yes, they are inferior indexes that are very annoyingly popular. Why do we always need to hear about the DOW? I'd rather just see VUG, VTV, VOO (basically the average of the first two), and Russell 2k.

Why is nasdaq 100 inferior? Because I don't care what stock exchange a company is listed on.

Why is Dow inferior? Because it's price weighted, which is senseless.

Which one wins has a lot to do with start and end dates.

[ChinchillaWhiplash]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Check your data.

Nasdaq was in the toilet for the first decade of the 21st century.

I looked at a chart from 1980 to present. Nas up 12,000+ %. SP500 up 2200%. Dow up 2400%.

[TomatoTomahto]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Check your data.

Nasdaq was in the toilet for the first decade of the 21st century.

I looked at a chart from 1980 to present. Nas up 12,000+ %. SP500 up 2200%. Dow up 2400%.

You surely weren’t sitting next to co-workers who lost their shirts in 2000.

[Calvert]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

I think these are good questions. Particularly comparing VTI vs QQQ vs SPY, DJIA being quite a different animal.
Here is a backtest comparing QQQ, SPY, & VTI. It starts Jan 2000 (since that is the 1st year of QQQ).
2000-2023 compare

QQQ is the looser due to the dot com bubble. If you start in 2002, QQQ wins.
Also, it's interesting to note that VTI and SPY track each other closely. I personally use VTI but will use SPY to avoid wash sales.

Here is a nice graphic showing the cross over of SPY and QQQ. (Really the indexes they track. I don't know whats in the ETFs).


Source

The article is interesting too. All the big names are in both. There is a current discussion about the importance of concentration (Top 10 being 25%).

[muffins14]

It is curious that the financial media uses both the Dow and Nasdaq as a gauge of overall market conditions along with the SP500. How much of the overall market cap are in these indexes? Why do these indexes seem to hold so much weight in reference to the overall market? Seems the SP500 should be good enough and tracks pretty close to the market as a whole and should be the only index that matters for tracking market moves.

The news needs to make news. And indices need customers.

I wouldn’t invest in the Dow because it’s like 30 stocks. Why are the other 470 in the S&P 500 bad?

I wouldn’t invest in the Nasdaq 100 because it’s just a bunch of stocks on the Nasdaq. It has nothing to do with the quality of the stocks, or sectors or factor values. It’s just where they are listed. Again, nonsensical.

[deikel]

The Nasdaq and Dow are bigger numbers. That lets the media say "The Dow fell by 200 points" which sounds much more dramatic than "The Dow fell by 0.6%".

+1, exactly this

They are marketing numbers that give fodder for economic porn. Sure it's interesting what the tech side of the economy does or the more industrial side of the economy, but they are both inferior to a broader market index like the S+P500. But it sure sounds grander if the day is: "Dow fell by 1000 points today - the end is nigh"

[Johm221122]

It is curious that the financial media uses both the Dow and Nasdaq as a gauge of overall market conditions along with the SP500. How much of the overall market cap are in these indexes? Why do these indexes seem to hold so much weight in reference to the overall market? Seems the SP500 should be good enough and tracks pretty close to the market as a whole and should be the only index that matters for tracking market moves.

The news Media is a for profit business. I bet you can find a lot of information in news media that you wouldn't follow or use.

Your looking backwards at performance and assuming it will be the same in your investment timeline. Is there a reason you think that Nasdaq did so well as an investment in the timeline your looking at and will that large outperformance as an investment over S&P 500 continue(if you think the outperformance will continue then go with it but understand the risk)

[toddthebod]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Check your data.

Nasdaq was in the toilet for the first decade of the 21st century.

I looked at a chart from 1980 to present. Nas up 12,000+ %. SP500 up 2200%. Dow up 2400%.

The NASDAQ, especially the NASDAQ 100, is a very tech-heavy index (Microsoft and Apple alone comprise 25%, and if you add Nvidia, Google, Facebook, and Amazon, you reach 50%). There's no question that the tech industry has grown substantially faster than other industries in the last 40 years. The question is whether you think that will continue.

You are basically asking, why invest in a total market fund? Technology companies have grown ten times as fast as everything else in the last 40 years, why not just invest in that sector?

[BrooklynInvest]

Pre-bogle-head days I bought a bunch of QQQQ (yeah that was right) around 2002ish with my first real bonus. Bought DIA a few years later. I was speculating.

By the time I started paying attention they'd gone up. Both are imperfect - too much tech and not enough finance in one, too undiversified in the other. And the inclusion criteria for both ain't exactly flawless. But I kept them - was either that or pay a lot of gains! As I got more disciplined I went to SPY and equivalents for all equities (outside small international and EM positions.) Those two legacies are about 1/4 of my stocks.

My "logic" for keeping:
They're both broad-ish indexes. They're cheapish and kinda even out a bit. Most importantly, he tax bill ain't worth the purity to me.

In short:
Certainly not the worst investing mistake I could have made but I wouldn't do it again. I think based on my timing, Qs have beaten S&P and Dow hasn't. I'll tell my son that the S&P is all that he'll need.

[Calvert]

I was interested as to why QQQ is up 26% this year and SPY is up about 9%.

The following site seems to provide real time quotes for the components of the indexes.

Nasdaq 100
SP500

Here is an image of both with weights and YTD returns
- NASDAQ 100 (left) .... SP500 (right)
- I tried to mark the ones in the SP not in NDX
- Broadcom is the last I am showing for SP ... it's #9 in the NASDAQ 100




Using my standard method of performance attribution analysis (just eyeballing it) ... I'd say:
1) Doubling the weight of APPL, MSFT, & Nvidia (wow up 82% YTD) ... makes for a good chunk of the difference.
2) SP500 holds steady eddys like BRK, JNJ, P&G, HD, etc. Which are not in the NDX.
3) SP has some sectors that are holding it back ... banking?

Everyone can draw their own conclusions ... about the future.

[jarjarM]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Check your data.

Nasdaq was in the toilet for the first decade of the 21st century.

I looked at a chart from 1980 to present. Nas up 12,000+ %. SP500 up 2200%. Dow up 2400%.

That # doesn't sound right, I think you're looking at the price index, not total return. Keep in mind that significant portion of the total return from S&P500 is from dividend. Nasdaq with the tilt toward large cap growth and no financial, will have less dividends. Don't look at price index on google finance or yahoo finance, find a chart that shows dividend reinvested.

[Kbg]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

[toddthebod]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

If only it was as easy as picking the assets that did the best in the past.

[burritoLover]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

added

[ChinchillaWhiplash]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

During this time period IJR had very high outperformance to SP500. QQQ was pretty close to SP500 but a little better also. Seems more like an argument for SC and SCV which IJR leans toward. https://www.portfoliovisualizer.com/bac ... ion3_2=100

[ChinchillaWhiplash]

So if you look at performance of the major indexes, it would appear that Nasdaq 100 has been superior to the S&P 500 by a large margin. The Dow 30 also beat it. Now that cheap index funds are available to hold these indexes, why would you not hold these over SP500 or TSM? Is there something inferior in the methodology of these indexes over SP500 or TSM? Are they not diversified enough?

Check your data.

Nasdaq was in the toilet for the first decade of the 21st century.

I looked at a chart from 1980 to present. Nas up 12,000+ %. SP500 up 2200%. Dow up 2400%.

That # doesn't sound right, I think you're looking at the price index, not total return. Keep in mind that significant portion of the total return from S&P500 is from dividend. Nasdaq with the tilt toward large cap growth and no financial, will have less dividends. Don't look at price index on google finance or yahoo finance, find a chart that shows dividend reinvested.

This was without div reinvested. I would still think Nas would be miles above. Dow would probably be higher. How much yield did SP500 have? I doubt that it was enough to add 10,000% compounding.

[z3r0c00l]

The Nasdaq and Dow are bigger numbers. That lets the media say "The Dow fell by 200 points" which sounds much more dramatic than "The Dow fell by 0.6%".

A very annoying habit, since I really have no idea what any number of points means from memory. Lately it has "plummeted by 500 points" or something like that, which is not a major daily move.

[muffins14]

I was interested as to why QQQ is up 26% this year and SPY is up about 9%.

The following site seems to provide real time quotes for the components of the indexes.

Nasdaq 100
SP500

Here is an image of both with weights and YTD returns
- NASDAQ 100 (left) .... SP500 (right)
- I tried to mark the ones in the SP not in NDX
- Broadcom is the last I am showing for SP ... it's #9 in the NASDAQ 100




Using my standard method of performance attribution analysis (just eyeballing it) ... I'd say:
1) Doubling the weight of APPL, MSFT, & Nvidia (wow up 82% YTD) ... makes for a good chunk of the difference.
2) SP500 holds steady eddys like BRK, JNJ, P&G, HD, etc. Which are not in the NDX.
3) SP has some sectors that are holding it back ... banking?

Everyone can draw their own conclusions ... about the future.

Which one was DOWN more in 2022?

One-year lookbacks tend to have issues like that.

[Logan Roy]

I just added the Nasdaq to a mostly stock-based All Weather portfolio, where I want to balance exposures to: inflation up, inflation down, growth up, growth down .. And the Nasdaq seems like a nice way to get more concentrated exposure to parts of the market that benefit from higher growth and lower rates (at least growth/rates higher/lower than forecast).

[Kbg]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

If only it was as easy as picking the assets that did the best in the past.

Anyone looking to cook the performance books wouldn't start a portfolio with QQQ in it in 2001 (which is a factor of data for IJR)

In my view it is just a plain better mix than the S500. Do a factor regression, look at the annual and monthly performance returns of the two assets. If you look at it closely you will see WHY it is a good mix of stocks. It's in the numbers and objectively better beyond just performance if you believe diversification is important. There is actual alpha in these two etfs over the S5 as well.

On IJS vs. IJR...my personal take is that there isn't much performance in SCV over SC any longer as the market has done it's thing with regard to SCV. However, I wouldn't argue against it either if one liked SCV over SC. I just don't think there is much benefit to the V part.

[toddthebod]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

If only it was as easy as picking the assets that did the best in the past.

Anyone looking to cook the performance books wouldn't start a portfolio with QQQ in it in 2001 (which is a factor of data for IJR)

In my view it is just a plain better mix than the S500. Do a factor regression, look at the annual and monthly performance returns of the two assets. If you look at it closely you will see WHY it is a good mix of stocks. It's in the numbers and objectively better beyond just performance if you believe diversification is important. There is actual alpha in these two etfs over the S5 as well.

On IJS vs. IJR...my personal take is that there isn't much performance in SCV over SC any longer as the market has done it's thing with regard to SCV. However, I wouldn't argue against it either if one liked SCV over SC. I just don't think there is much benefit to the V part.

There are plenty of threads on SCV already, so ignoring that, it is plainly obvious that the outperformance of the NASDAQ is entirely due to the heavy reliance on tech stocks. In fact, I bet if you removed just AAPL and MSFT, most of that outperformance would disappear. There is no reason to believe they will continue to outperform.

[Calvert]

I was interested as to why QQQ is up 26% this year and SPY is up about 9%.

....

Which one was DOWN more in 2022?

One-year lookbacks tend to have issues like that.

Sure ... but then which one was up more in 2021?
Actually, it was SPY!

OK, let me try again .... 2020?

Code: Select all

       SPY     QQQ
2020 +18.4    +48.4
2021 +28.7    +27.4
2022 -18.2    -32.6
2023 ~+ 9     ~+26

The only obvious things to me are:
1) Don't look for the needle (NVDA) ... just buy the haystack
2) QQQ is more volatile than SPY

Other than those two, I'm not sure I can say much.

[jarjarM]

I looked at a chart from 1980 to present. Nas up 12,000+ %. SP500 up 2200%. Dow up 2400%.

That # doesn't sound right, I think you're looking at the price index, not total return. Keep in mind that significant portion of the total return from S&P500 is from dividend. Nasdaq with the tilt toward large cap growth and no financial, will have less dividends. Don't look at price index on google finance or yahoo finance, find a chart that shows dividend reinvested.

This was without div reinvested. I would still think Nas would be miles above. Dow would probably be higher. How much yield did SP500 have? I doubt that it was enough to add 10,000% compounding.

It's quite a bit of difference w/ and w/o dividend reinvestment (compounding works hard).

Since Jan 1980, S&P500 w/o dividend reinvestment is ~3680% (CAGR = 8.744%), w/ dividend reinvestment 11,125% (CAGR = 11.51%).
For reference, in the same time frame, DJ w/o dividend reinvestment is ~3289% (CAGR = 8.47%), w/ dividend reinvestment 11,979% (CAGR = 11.7%).

Every index composition is different (obviously), so their price index and total return behavior will be a bit different.

SP500 Return
Dow Jones Return

[billaster]

Folks like to say the DOW is garbage, but if Total Stock Market Index didn't exist, I would be fine with the DOW. All those portfolio theories don't amount to a hill of beans.

[Kbg]

There are plenty of threads on SCV already, so ignoring that, it is plainly obvious that the outperformance of the NASDAQ is entirely due to the heavy reliance on tech stocks. In fact, I bet if you removed just AAPL and MSFT, most of that outperformance would disappear. There is no reason to believe they will continue to outperform.

I assume you are aware that ~14% of the S&P 500 is in those two stocks and ~23% of the Nasdaq 100...so I bet if you take those two out of the S&P 500 a lot of its performance disappears as well. And again, 50% of the mix is in small cap. So simple math says 700 stocks is more diverse than 500 and the weighting of the two in the proposed mix is actually less than in the S5.

There's a huge amount of cap weighted overlap between the two indexes and the fact is tech and biotech has driven most of the performance of both of them since the 1990s...that's a feature, not a bug. If we were discussing an equal weighted S5 index then this would be a moot discussion and inaccurate point I'm making. Cap weighted indexes are Darwinian and that's a good thing in my view. Only the best public companies get to be in them and only the best of the best stay in them for long periods of time.

[Logan Roy]

A perfectly lovely combination that addresses (statistically) all the QQQ naysayers...50% QQQ and 50% IJS...the combination adds 2-3% CAGR on all rolling periods over SPY.

And it's hard to argue the combination isn't MORE diversified than the SPY either.

If only it was as easy as picking the assets that did the best in the past.

Anyone looking to cook the performance books wouldn't start a portfolio with QQQ in it in 2001 (which is a factor of data for IJR)

In my view it is just a plain better mix than the S500. Do a factor regression, look at the annual and monthly performance returns of the two assets. If you look at it closely you will see WHY it is a good mix of stocks. It's in the numbers and objectively better beyond just performance if you believe diversification is important. There is actual alpha in these two etfs over the S5 as well.

On IJS vs. IJR...my personal take is that there isn't much performance in SCV over SC any longer as the market has done it's thing with regard to SCV. However, I wouldn't argue against it either if one liked SCV over SC. I just don't think there is much benefit to the V part.

There are plenty of threads on SCV already, so ignoring that, it is plainly obvious that the outperformance of the NASDAQ is entirely due to the heavy reliance on tech stocks. In fact, I bet if you removed just AAPL and MSFT, most of that outperformance would disappear. There is no reason to believe they will continue to outperform.

I agree, but I think there is a reason we could expect them to outperform indefinitely, and it's that we've done such a poor job of regulating tech. There are clearly new economic spaces we operate in (like long-form video), and tech firms can completely monopolise digital sectors while only being subject to competition laws designed to regulate factories.

China's clearly learning from this, and knocked a whole lot of wind out of its Big Tech share prices, without really stunting dominance. Ultimately, our system should suffer, because we're moving into an economy dominated by a handful of large monopolies. And when AI takes over, we won't necessarily need competition, and then we won't necessarily need to compensate investors – but I think businesses could get very expensive before that happens.

[toddthebod]

There are plenty of threads on SCV already, so ignoring that, it is plainly obvious that the outperformance of the NASDAQ is entirely due to the heavy reliance on tech stocks. In fact, I bet if you removed just AAPL and MSFT, most of that outperformance would disappear. There is no reason to believe they will continue to outperform.

I assume you are aware that ~14% of the S&P 500 is in those two stocks and ~23% of the Nasdaq 100...so I bet if you take those two out of the S&P 500 a lot of its performance disappears as well. And again, 50% of the mix is in small cap. So simple math says 700 stocks is more diverse than 500 and the weighting of the two in the proposed mix is actually less than in the S5.

Imagine an index that held 1,000 stocks but was overweighted in AAPL such that it currently comprised 50% of the index. Your "simple math" would consider this "more diverse" than an S&P 500, while your returns over the last forty years would dwarf the S&P 500 even if the other 999 stocks in your index had zero return. Yet it is plainly obvious that your overperformance is entirely the result of being overweight in a single stock, and future performance will be heavily driven by the performance of that stock.

[Kbg]

Well let's do the math.

S5: AAPL + MSFT = 14%

N1: AAPL + MSFT = 23%

.5 * N1 + .5 SC = 1 N1CS Mix

Follow closely here now....

23% * .5 = 11.5%

And 14% > 11.5%, therefore mathematically, these two stocks have had a greater influence on the S5's performance than the proposed mix

And let's assume, for arguments sake, that the above percentages have remained fixed since both stocks showed up in either index and the SC index existed...in every case the impact of these two stocks would have had a greater impact on the performance of the S5 than the proposed mix. Obviously in the real world their impact waxes and wanes with their cap...but then that applies to BOTH indexes.

This is a stupid reply...but the point that appears to have completely slipped your grasp is that the critique you have made about these two stocks should also be applied to the S5. If you claim a large part of the mixes success is derived from them, it also applies to the S5.

And just for fun, and amazingly, tech accounted for ~40% of both indexes at the height of the dotcom bust. OBTW...~80 of the N1s stocks are in the S5 at any one time.

So the argument that the N1 is a tech heavy index is accurate...but...so goes the S5.

And the bottom line (again)...there's not a single objective measure that does not indicate the proposed mix is more diversified and performs better. And has just been written about, the two stock critique nets out to a non-issue

[toddthebod]

And the bottom line (again)...there's not a single objective measure that does not indicate the proposed mix is more diversified and performs better. And has just been written about, the two stock critique nets out to a non-issue

The only critique that matters is your use of the present tense instead of the past tense.

[AnotherRetiredGuy]

Folks like to say the DOW is garbage, but if Total Stock Market Index didn't exist, I would be fine with the DOW.

Thanks for that chart.

While the news media should switch to reporting the total stock market, as you show, the traditional DJIA number gives a surprisingly good picture of the whole.

When I was a child, the Dow was big daily news — front page if it was a slow news day. They then would quote someone making an unfalsifiable guess as to why it had gone up or down, treating the guess as a fact.

Maybe I’m wrong about this, but I think that in the major U.S. newspapers there is less attention to the largely meaningless daily DJIA fluctuations than there was 50 years ago. I don’t watch TV much, but I think the 30 minute network news shows also report on daily movements less than before. Am I correct, or is this wishful thinking?

[Kbg]

And the bottom line (again)...there's not a single objective measure that does not indicate the proposed mix is more diversified and performs better. And has just been written about, the two stock critique nets out to a non-issue

The only critique that matters is your use of the present tense instead of the past tense.

Correct, and from this I assume you only invest in a world total market portfolio of all asset classes?

Otherwise, your critique doesn't hold water either. You understand that, right?

[Charles Joseph]

Too complicated. RTM, etc.