Major US Market Index Comparison

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A market index can be viewed as a hypothetical portfolio made up of various different equities with different weights. These indexes are used to gauge and quantify the overall market performance over time, as well as gauge the performance of individually picked portfolios including those managed by portfolio managers.

The composition and the weights of the individual equities within each changes over time. While these indices hypothetical portfolios and cannot be individually traded, one may trade exchange-traded fund (ETFs) and index funds that that aim to closely track them. Due to their diversity, in theory, an ETF or an index fund tracking index funds may lower the risk of trading individual stocks.

A low-cost index fund is the most sensible equity investment for the great majority of investors. By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.

Instead of individually picking stocks and actively managing and frequently trading them, a common investing strategy adopted by investors is passive investment where one buys and holds index funds and ETFs with that track major market indices such as the S&P500.

This article goes over four of the US major market indexes: S&P500, Nasdaq-100, Dow Jones Industrial Average (DJIA), and Russell 2000 index composed of publicly traded companies which are common to be displayed on financial and market related websites.

Keep in mind there are many different market indexes, including general market broard indexes, total market indexes, sector-concentrated indexes (for example the PHLX semi-conductor index tracking the semiconductor sector), foreign market indexes such as the FTSE 100 and Nikkei 225.

S&P500

S&P500 (standing for Standard and Poor's 500) is one of the most popular and globaly recognized market index which tracks 500 of large-cap publicly traded US companies. S&P500 composition currently spans over 11 different sectors.

The composition of the individual holdings making up the S&P500 are weighted by the their market-cap, giving higher weights to stocks with the larger market caps. Currently, the technology sector compromises roughly 30% of the index and the accumulated weight of the top 10 equities within S&P500 make up roughly 30% of the total index.

Because of the index's exposure to various different sectors of the economy, the S&P500 index is sometimes viewed as the overall gauge of "the market" in the US. As an example, the trigger point of market wide circuit breakers (MWCB) which halt cross-market trading when there is a significant "market sell-off" in a day, are calculated based off a 7-20% drop in S&P500's prior closing price.

Since its inception, S&P500 has had an average annualized return of roughly 10%. While S&P500 is a market index and itself cannot be directly traded, there are ETFs and index funds that aim to track the index. Because of its diversity and exposure to various different sectors, S&P500 ETFs and index funds have become a popular cboice for retail investors.

The investor's chief problem – and even his worst enemy – is likely to be himself.

Table below lists some of the ETFS and index funds that aim to track the S&P500 index.

Ticker	Name	Type	Inception	Expense Ratio (%)
SPY	SPDR S&P 500 ETF Trust	ETF	1993-01-22	0.09
SWPPX	Schwab S&P 500 Index Fund	Index Fund	1997-05-19	0.02
IVV	iShares Core S&P 500 ETF	ETF	2000-05-15	0.03
SPLG	SPDR Portfolio S&P 500 ETF	ETF	2005-11-08	0.03
VOO	Vanguard S&P 500 ETF	ETF	2010-09-07	0.03
FXAIX	Fidelity 500 Index Fund	Index Fund	2011-05-04	0.01

Dow

The Dow Jones Industrial Average (DJIA), or Dow 30, or sometimes referred to simply as "the Dow" tracks about 30 of the large-cap publicly traded US companies. The weights of the stocks making up DJIA's composition is price-based, giving stocks with higher prices a larger weight.

Composition of Dow Jones may overlap S&P, but with different weights for its holdings. Figure below shows how the weights currently may be distributed for stocks overlapping between S&P500 and the Dow. Since the number of stocks in the Dow are an order of magnitude lower, the individual equities within the Dow have a higher weight.

Despite its significant overlap with the S&P500 index, the Dow 30 may be missing exposure to sectors that included in the S&P500. For example, currently the Dow may not provide any exposure to the real-estate sector.

Since the Dow 30 is just a market index, it cannot be directly traded. There are exchange-traded fund (ETFs) that aim to track the Dow Jones. Some of the ETFS and index funds that aim to track the Dow include:

Ticker	Name	Type	Inception	Expense Ratio (%)
DIA	SPDR Dow Jones Industrial Average ETF Trust	ETF	1998-01-13	0.16
IYY	iShares Dow Jones U.S. ETF	ETF	2000-06-12	0.20
DDM	ProShares Ultra Dow30	ETF	2006-06-19	0.95

Nasdaq

The Nasdaq-100 is another common index which is composed of roughly 100 of the largest common equities listed on Nasdaq with high concentration in the technology sector. Similar to the S&P500, equities making up the Nasdaq-100 are weighted by the their market-cap, giving higher weights to stocks with the larger market caps.

The composition of Nasdaq-100 may have overlaps with both the S&P500 and the Dow. Even so, the Nasdaq-100 is considered "tech heavy" with the technology sector currently making up roughly 50% of its weight. The Nasdaq-100 has had incredible gains over the past decade, but following the burst of the technology bubble in 2000, it took the index over 15 years to reach back to its previous all-time-high.

Currently roughly 75%, by weight, of the equities in Nasdaq-100 are represented as roughly 30% (by weight) of the equities in S&P500. These include the big name companies such as Amazon (AMZN), Nvidia (NVDA) and Pepsi Co (PEP). Following figure shows how difference in the weights assigned to overlapping components of the Nasdaq-100 and the S&P500.

There is also an overlap of holdings in the Dow and the Nasdaq-100, though they have different weights associated with them. Currently, roughly 20% of the Dow (as weight) may make up roughly 30% of the equities (by weight) in the Nasdaq-100. Note that the overlapping equities within each index may have substantially higher or lower weights.

There are various ETFs and index funds that aim to give exposure the Nasdaq-100. Some of which include:

Ticker	Name	Type	Inception	Expense Ratio (%)
QQQ	Invesco QQQ Trust	ETF	1999-03-10	0.20
USNQX	USAA NASDAQ-100 Index Fund	Index Fund	2000-10-27	0.42
QQQM	Invesco NASDAQ 100 ETF	ETF	2020-10-13	0.15

Russell 2000

The Russell 2000 is another market index that tracks roughly 2000 of the publicly traded US companies. Similar to the S&P500, equities making up the Russell 2000 are weighted by the their market-cap. However, unlike the S&P500 and the Dow which track large-cap companies, the Russel 2000 tracks small-cap companies.

Since the Russell 2000 tracks small-cap companies the current composition of the Russell 2000 or their ETFs may have no overlapping equities with the S&P500, the Dow, and the Nasdaq as show in the figure below. While the Russell 2000 index has (currently) exposure the same sectors as S&P500, note that the companies contained are small-caps.

Figures below show the comparison of the sector breakdown in Russell 2000, S&P500, Dow, and Nasdaq-100, as well accumulated weight distribution, sorted in descending order, of each index compares to the number of equities.

There are various ETFs and index funds that aim to give exposure the Russel 2000. Some of which include:

Ticker	Name	Type	Inception	Expense Ratio (%)
IWM	iShares Russell 2000 ETF	ETF	2000-05-22	0.19
VTWO	Vanguard Russell 2000 ETF	Index Fund	2010-09-20	0.10

Past Performance

Past performance is not indicative of future performance. But in the case of index funds, past performance may help in providing some level of expectation on the rate of return with a sufficiently long time horizon. Table below includes the 1, 2, 5 and 10 year total return, not adjusted for inflation, for each of the market indexes.

Index	1 year	2 year	5 year	10 year
S&P500	-12%	20%	57%	186%
Dow	-12%	14%	41%	140%
Nasdaq-100	-20%	12%	105%	365%
Russell 2000	-20%	18%	22%	119%