Is One of These Broad Market ETFs Better Than the Other?

Deciding between the Schwab U.S. Broad Market ETF (NYSEMKT:SCHB) and the State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF(NYSEMKT:SPTM) involves choosing between two exceptionally low-cost vehicles that differ primarily in their index depth and total holding counts.

Both funds provide simple, efficient entries into the broad U.S. stock market for a fraction of the cost of active management. These total market funds are often used by investors as foundational blocks to ensure they do not miss out on the growth of smaller companies while maintaining heavy exposure to proven blue-chip leaders. While one tracks the S&P Composite 1500, the other follows the Dow Jones U.S. Broad Stock Market Index.

Snapshot (cost & size)

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

Expense ratios for both products sit at 0.03%, placing them among the most affordable core ETFs available today. This means for every $10,000 invested, an investor pays just $3 in annual management fees. Dividend yields are also identical at 1.1%, suggesting that income-seeking investors will find little to differentiate these two based on payout alone.

Performance & risk comparison

What's inside

Schwab U.S. Broad Market ETF (NYSEMKT:SCHB) aims to replicate the Dow Jones U.S. Broad Stock Market Index, a benchmark that includes large, mid, and small-cap stocks. Its portfolio of 2,357 holdings is heavily tilted toward technology at 37%, followed by financial services at 11%, and communication services at 10%. Its largest positions include Nvidia Corp (NASDAQ:NVDA) at 6.59%, Apple Inc (NASDAQ:AAPL) at 5.95%, and Microsoft Corp (NASDAQ:MSFT) at 3.93%. The fund was launched in 2009. Schwab U.S. Broad Market ETF has paid $0.30 per share over the trailing 12 months, which on its recent ~$28.91 share price works out to a 1.1% yield.

State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSEMKT:SPTM) tracks the S&P Composite 1500 Index, which provides a representative sample of approximately 90% of the investable U.S. market. The fund maintains 1,511 holdings, with sector concentrations in technology at 37%, financial services at 11%, and consumer cyclical at 10%. Top holdings include Nvidia Corp (NASDAQ:NVDA) at 6.86%, Apple Inc (NASDAQ:AAPL) at 6.20%, and Microsoft Corp (NASDAQ:MSFT) at 4.09%. The fund was launched in 2000. State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF has paid $0.97 per share over the trailing 12 months, which on its recent ~$90.63 share price works out to a 1.1% yield.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

Broad market ETFs seek to be the ultimately diversifier, all stock in one ETF wrapper. They invest in the entire market, or at least most of it, including small-, mid-, and large-cap stocks.

So when it comes to comparing broad market ETFs like these, is there really any difference? Yes, there is, but not much.

The SPDR ETF, while broad market, only tracks about 1,500 stocks, so roughly 90% of the investable universe, leaving off some microcaps. The Schwab ETF goes a bit deeper, with nearly 2,400 stocks.

While the returns are similar over the past year, with both up about 21%, the SPDR ETF has slightly better long-term performance over the past 5 and 10-year periods. But the difference is neglible. The State Street ETF has a five-year annualized return of 12.6% while the Schwab ETF has a five-year annualized return of 12%.

They both have ultra low expense ratios and the same distribution yields, so there is no difference there, either. If you are looking for a broad market diversifier, you really canʻt go wrong with either one of these ETFs. If you want slightly more diversification, go with the Schwab ETF but both would be solid options.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.