Is it better to invest in S&P or Dow Jones? (2024)

Is it better to invest in S&P or Dow Jones?

The Bottom Line. While both the DJIA and S&P 500 are used by investors to determine the general trend of the U.S. stock market, the S&P 500 is more encompassing, as it is based on a larger sample of total U.S. stocks.

One of the limitations of the S&P and other market-cap-weighted indexes occurs when stocks in the index become overvalued. They rise higher than their fundamentals warrant. The stock typically inflates the overall value or price of the index if it has a heavy weighting in the index while being overvalued.

Total stock market index funds are only slightly more diversified than S&P 500 index funds. Since both types of indexes are heavily weighted toward large-cap stocks, the performance of the two funds is highly correlated (similar).

DIA is more expensive with a Total Expense Ratio (TER) of 0.16%, versus 0.0945% for SPY. DIA is up 10.25% year-to-date (YTD) with +$372M in YTD flows. SPY performs better with 18.64% YTD performance, and -$21.16B in YTD flows.

In general, the benefits of investing in the Dow Jones Industrial Average outweigh the disadvantages. Consistent long-term returns: the Dow Jones has a long history of strong performance, with an average annual return of around 10% since its inception in 1896.

Basic Info. S&P 500 10 Year Return is at 186.0%, compared to 178.6% last month and 172.2% last year. This is higher than the long term average of 115.3%.

Investing in an S&P 500 fund can instantly diversify your portfolio and is generally considered less risky than purchasing individual stocks directly. Because S&P 500 index funds or ETFs track the performance of the S&P 500, when that index does well, your investment will, too. (The opposite is also true, of course.)

The Bottom Line. While both the DJIA and S&P 500 are used by investors to determine the general trend of the U.S. stock market, the S&P 500 is more encompassing, as it is based on a larger sample of total U.S. stocks. S&P Dow Jones Indices.

Assuming an average annual return rate of about 10% (a typical historical average), a $10,000 investment in the S&P 500 could potentially grow to approximately $25,937 over 10 years.

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Also, research suggests that when it comes to the S&P 500's historical returns, there's never been a bad time to buy as long as you're a long-term investor. Analysts at Crestmont Research examined the index's rolling 20-year total returns and found that every single one of those periods ended in positive gains.

SPY has a consensus rating of Moderate Buy which is based on 406 buy ratings, 91 hold ratings and 7 sell ratings. What is SPY's price target? The average price target for SPY is $626.54.

Here's Where Pros See Stocks Headed Next. It took seven years for the Dow Jones Industrial Average to move from 20,000 to 40,000, and it had to bounce back from an April slump to cross the finish line. The 30-component blue-chip index now joins the Nasdaq and the S&P 500 in making recent highs.

The downside of the Dow 30 is that since it tracks only a few companies, it isn't a good measure to represent the US economy. It also doesn't track many important industries like real estate or utilities. The Dow Futures is a contract that is based on the performance of the Dow 30.

But it's important to note that the S&P 500 index itself does not pay dividends—the companies in the index do. An investor has to buy shares of the companies themselves or of index funds in order to receive dividends. “The S&P itself does not pay a dividend,” explains Titan investment manager Christopher Seifel.

You can't directly invest in the index itself, but you can buy individual stocks of S&P 500 companies, or buy a S&P 500 index fund through a mutual fund or ETF. The latter is ideal for beginner investors since they provide broad market exposure and diversification at a low cost.

Basic Info. S&P 500 Monthly Return is at 1.13%, compared to 3.47% last month and 3.11% last year. This is higher than the long term average of 0.57%. The S&P 500 Monthly Return is the investment return received each month, excluding dividends, when holding the S&P 500 index.

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

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Craziest thing I learned recently: $10,000 invested in the S&P 500 in 1980 would be worth over $1M today.

Investing products such as stocks can have much higher returns than savings accounts and CDs. Over time, the Standard & Poor's 500 stock index (S&P 500), has returned about 10 percent annually, though the return can fluctuate greatly in any given year. Investing products are generally very liquid.

Stock Market vs.

In terms of averages, stocks have tended to have higher total returns over time. The S&P 500 stock index has had an average annualized return of around 10% over very long periods (higher if you include dividends), while average annual real estate returns are often more in the 4-8% range.