SPTM vs. SCHB Compared: What to Look for in a Broad Market Index Fund

Schwab U.S. Broad Market ETF (NYSEMKT:SCHB) and State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSEMKT:SPTM) provide low-cost, comprehensive access to the U.S. market, though their specific index targets and holding counts vary.

Broad market ETFs are designed to capture the performance of the entire domestic stock market in a single package. For long-term investors, these funds serve as core holdings by providing diversification across large-, mid-, and small-cap companies, helping to mitigate the risks associated with individual stock picking.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Both funds are exceptionally affordable, each sporting a 0.03% expense ratio. While costs are identical, the Schwab fund currently offers a marginally higher dividend payout, providing a 0.1 percentage point yield advantage over the State Street fund.

Performance & risk comparison

What's inside

Schwab U.S. Broad Market ETF tracks the Dow Jones U.S. Broad Stock Market Index, holding 2,394 positions. Its sector allocation includes technology at 35.8%, financial services at 12%, and healthcare at 9.4%. Its largest positions include Nvidia at 7%, Apple at 6.7%, and Microsoft at 5.4%. The fund launched in 2009. It has paid $0.31 per share over the trailing 12 months, which on its recent ~$29.6 share price works out to a 1.1% yield.

State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF tracks the S&P Composite 1500 Index, which represents roughly 90% of the investable U.S. equity universe. It holds 1,510 stocks, with a sector tilt toward technology at 36.5%, financial services at 12%, and industrials at 10.4%. Its largest positions include Nvidia at 7.3%, Apple at 6.93%, and Microsoft at 5.56%. The fund launched in 2000. It has paid $0.98 per share over the trailing 12 months, which on its recent ~$93.2 share price works out to a 1% yield.

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Which looks like the better buy

The Schwab U.S. Broad Market ETF and the State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF are low-cost passively managed broad-market indexes that can be foundational holdings in a diversified portfolio. Both funds allow investors to track the performance of nearly the entire market, both charge a low 0.03% expense ratio, and both pay out just about 1% in dividends. So how can you choose one over the other?

It might come down to which specific index the fund tracks. The State Street fund tracks an index of about 1500 companies, while the Schwab fund's index holds more than 2,000, giving investors access to about 500 of the smallest companies by market cap. These stocks won't move the overall fund too much, but small-cap companies can have outsize growth potential. That slightly smaller base also means the State Street fund is slightly more concentrated, with the top 10 holdings making up 36.05% of the fund, compared to 32.5% with the Schwab fund. If you're looking to cast a wide net, SCHB may be more appealing to you.

That said, SPTM has slightly outperformed SCHB over the last one and five years, and with a slightly shallower maximum drawdown, likely owing to its slightly higher concentration in the tech names that have driven the market over the past few years.

You should also be aware of how these funds complement any other holdings in your account. If you already hold a fund that tracks the S&P 500 or Nasdaq-100 indexes, you're probably doubling up on the market's biggest names. There's nothing wrong with that, necessarily, but it's important to understand what you hold and how those holdings can affect your portfolio's performance.

Sarah Sidlow has positions in Apple, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.