The Dow Is an Outdated Index

Kiplinger.com has an interesting article titled "The Dow Is an Outdated Index". Here is an excerpt:

The following benchmarks provide more-accurate pictures of the U.S. stock market, and all are tracked by low-cost index funds:

Standard & Poor's 500-stock index tracks 500 mostly large companies. Stocks are weighted by their market capitalization, or value. You can invest in the S&P 500 through mutual funds from a variety of sponsors, including Fidelity, Schwab and Vanguard. Or, you can buy iShares Standard & Poor's 500-stock index (symbol IVV), an exchange-traded fund with a minuscule annual expense ratio of 0.09%.

The MSCI U.S. Broad Market index includes nearly all publicly traded domestic stocks. Vanguard Total Stock Market ETF (VTI), which tracks the index, has annual fees of just 0.07%. If you'd prefer a regular mutual fund, Vanguard Total Stock Market Index (VTSMX) invests identically, charging 0.16% annually.

The Russell 3000 index follows the 3,000 biggest U.S companies. You can buy this index through iSharesRussell 3000 Index (IWV), an ETF that charges 0.21% annually.

What I find very interesting is that two of these ETFs are represented in our balanced ETF portfolio, the SPY and the VTI. We also have the Russell 2000, IWM, which is the the Russell family. This definitely lends creditibility to the ETFs we have selected.

The entire article from Kiplinger is available here.