SPTM vs. SCHB Compared: What to Look for in a Broad Market Index Fund
SCHB offers wider diversification with 2,394 holdings, while SPTM delivered stronger 1-year returns and lower maximum drawdown over five years.
Schwab U.S. Broad Market ETF (SCHB) and State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM) are both low-cost, broad-market index funds that provide comprehensive access to the U.S. stock market. Although they share similar expense ratios and dividend yields, there are some differences between the two that investors should consider when choosing between them.
SCHB tracks the Dow Jones U.S. Broad Stock Market Index, which consists of 2,394 stocks representing over 500 of the smallest companies by market cap. This wider base includes smaller companies that could have outsize growth potential. In contrast, SPTM tracks the S&P Composite 1500 Index, which comprises 1,510 stocks and is more concentrated, with the top 10 holdings accounting for 36.05% of the fund's assets.
While both funds have similar performance trends over the past one and five years, SPTM has slightly outperformed SCHB during this period. Additionally, SPTM has a shallower maximum drawdown, likely due to its higher concentration in tech stocks that have driven market growth recently.
When deciding between these two funds, investors should also consider how they might complement their existing holdings. If they already own funds tracking the S&P 500 or Nasdaq-100 indexes, they may be doubling up on the market's biggest names. However, there's no inherent issue with this approach, and it ultimately comes down to personal preference and investment strategy.
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