{"id":20984,"date":"2023-09-26T23:56:00","date_gmt":"2023-09-26T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=20984"},"modified":"2025-11-17T19:42:11","modified_gmt":"2025-11-17T11:42:11","slug":"market-index-and-etf","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/","title":{"rendered":"Return of market index and the market index ETF is not identical"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/#Note\" >Note:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/#Market_index_and_market_index_ETF_are_different\" >Market index and market index ETF are different<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/#Avoid_ETFs_concentrate_on_few_stocks\" >Avoid ETFs concentrate on few stocks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/#The_corresponding_ETFs_in_the_market\" >The corresponding ETFs in the market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Note\"><\/span>Note:<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Although Yuanta Taiwan 50 is claimed to be a Taiwan stock market index ETF, it is actually difficult to represent the Taiwan stock market at all, because Yuanta Taiwan 50 only has 50 constituent stocks, which are not exactly the same as the constituent stocks of the Taiwan Stock Weighted Index.<\/li>\n\n\n\n<li>Currently among the Taiwan stock ETFs, Yuanta Taiwan 50 (0050), Fubon Taiwan 50 (006208), Fubon Corporate Governance (00692), Yuanta Taiwan ESG Sustainability (00850), and Cathay Taiwan Leaders are advertised as Taiwan stock large-cap index ETFs. 50 (00922) etc.<\/li>\n\n\n\n<li>The investment targets of these ETFs are based on stocks with larger market capitalization in Taiwan stock market. The top five stocks in Taiwan stock market by market capitalization are TSMC, MediaTek, Hon Hai, Chunghua Telecom, and Fubon Financial. In particular, the rise and fall of TSMC&#8217;s stock price will be linked to each other. Performance of market capitalization ETFs.<\/li>\n\n\n\n<li>As of the end of November 2023, 0050 TSMC accounts for 46.7%, 006208 TSMC accounts for 45.43%, 00692 TSMC accounts for 38.1%, 00850 TSMC accounts for 29.45%, and 00922 TSMC accounts for 28.56%.<\/li>\n<\/ul>\n\n\n\n<p><strong>Note<\/strong>: Strictly speaking, there is no ETF in the Taiwan stock market that track TaiEx index. IVV or VOO for US stocks are ETFs that track US stocks market index. Additionally, popular high-dividend ETFs are NOT ETF track stock market index.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Market_index_and_market_index_ETF_are_different\"><\/span>Market index and market index ETF are different<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Please remember that what this article is discussing is &#8220;the market index and market index ETF are not necessarily completely equal&#8221;! Why?<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>There are bound to be fees associated with an ETF: So in theory, a large-cap index ETF should pay at least a little less than the broad-market index it tracks.<\/li>\n\n\n\n<li>Depending on the publisher, there will be differences in handling fees, management fees, commissions and other related expenses.<\/li>\n\n\n\n<li>The issuer may modify the constituent stocks based on the tracked market index, causing the issuer&#8217;s ETF and the tracked market index to have different constituent stocks. Yuanta Taiwan 50, the most famous Taiwanese stock market, is the most famous example; because although Yuanta Taiwan 50 is the most famous Taiwan stock market index ETF, it is actually difficult to represent the Taiwan stock market at all, because Yuanta Taiwan 50 only has The 50 constituent stocks are not exactly the same as the constituent stocks of the Taiwan stock weighted index.<\/li>\n\n\n\n<li>The efficiency of the issuer affects the return: Although the large-cap index ETF advertises that it tracks the large-cap index simultaneously, it will still lag behind the actual performance of the large-cap index it tracks.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Avoid_ETFs_concentrate_on_few_stocks\"><\/span>Avoid ETFs concentrate on few stocks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>TSMC (ticker: TSM) accounts for about 25% of the weight of the Taiwan stock index. However, during the bull market in 2021, TSMC once took about 40% of the weight of Yuanta Taiwan 50, causing Yuanta Taiwan 50 (aka 0050) to TSMC seriously. Tilt, this has fundamentally violated the most basic spirit of ETF risk diversification!<\/p>\n\n\n\n<p>Will the above-mentioned incident happen in the US stock market? The answer is impossible. why?<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Index compilers in the United States (such as Standard &amp; Poor&#8217;s) will regularly delete and replace constituent stocks, and the frequency is not low, especially the more famous the index, the higher the update frequency.<\/li>\n\n\n\n<li>The most recent example is that since 2023, most of the gains in U.S. stocks have come from the seven major technology stocks, especially when U.S. stocks enter a bear market in 2022. The S&amp;P 500 Index, which represents the US stock market, has fallen by 20% within a year, making the rise of technology stocks particularly obvious compared with other fields.<\/li>\n\n\n\n<li>As an example, the Nasdaq stock exchange therefore rebalanced its Nasdaq 100 index in July 2023 to address the index&#8217;s excessive concentration. For individual stocks whose weight exceeds 4.5% of the Nasdaq 100 Index, if the combined market value accounts for more than 48% of the index, the weight needs to be redistributed, and the goal is to drop it below 40%; so as not to cause distortion of the index and distortion of representativeness , Excessively leaning towards several individual stocks.<\/li>\n\n\n\n<li>The market value of the top seven technology stocks in the US stock market exceeds one trillion US dollars at every turn. As a result, in June 2023, the value of the eight major technology stocks in the US accounted for nearly one-third of the market value of the S&amp;P 500 Index! Apple (ticker: AAPL ) and Microsoft (ticker: MSFT ) accounted for the combined weight of the world&#8217;s two most valuable companies in the S&amp;P 500 jumped to a record 14%, with <a href=\"https:\/\/www.nasdaq.com\/articles\/549-billion-reasons-to-buy-apple-stock\" target=\"_blank\" rel=\"noreferrer noopener\">Apple alone accounting for The total weight of 7.6% is more than twice that of the German stock market<\/a>. But even so, there will be no such absurd things as TSMC taking up 25% of the weight of the Taiwan stock index and about 40% of the weight of Yuanta Taiwan 50 (aka 0050).<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_corresponding_ETFs_in_the_market\"><\/span>The corresponding ETFs in the market<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For an introduction to these major indices, see my previous article&#8221;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/13\/top-10-etfs\/\" target=\"_blank\" rel=\"noreferrer noopener\">Top 10 ETFs and important major US stock market index<\/a>&#8220;<\/p>\n\n\n\n<p>The following table is a list of the more famous large-cap ETFs in the U.S. and Taiwan stock markets. Note the difference between the first and second row in the table, which is the focus of this article. And the website of the tool for querying the annualized return of the index and the rate of return for a specific year (click the link to the tool I developed):<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Major index<\/td><td>Corresponding ETFs<\/td><td>The tool to look up the annualized return of the index, or get the rate of return for a specific year (click the link)<br><\/td><\/tr><tr><td>Dow Jones Industrial Average<\/td><td>DIA<\/td><td><a href=\"https:\/\/www.granitefirm.com\/us\/tools\/djia\/\" target=\"_blank\" rel=\"noreferrer noopener\">Dow Jones Industrial Average IRR Query<\/a><\/td><\/tr><tr><td>S&amp;P 500 Index<\/td><td>SPY\u3001IVV\u3001VOO<\/td><td><a href=\"https:\/\/www.granitefirm.com\/us\/tools\/sp500\/\" target=\"_blank\" rel=\"noreferrer noopener\">S&amp;P 500 Index IRR Query<\/a><\/td><\/tr><tr><td>Nasdaq index<\/td><td>QQQ<\/td><td><a href=\"https:\/\/www.granitefirm.com\/us\/tools\/nasdaq\/\" target=\"_blank\" rel=\"noreferrer noopener\">Nasdaq Index IRR Query<\/a><\/td><\/tr><tr><td>Philadelphia Semiconductor index<\/td><td>SOXX<\/td><td><a href=\"https:\/\/www.granitefirm.com\/us\/tools\/sox\/\" target=\"_blank\" rel=\"noreferrer noopener\">Philadelphia Semiconductor Index IRR Query<\/a><\/td><\/tr><tr><td>Taiwan Stock Exchange<\/td><td>0050<\/td><td><a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/15\/taiwan-stock-exchange\/\" target=\"_blank\" rel=\"noreferrer noopener\">Querier to Annualized rate of return for Taiwan Stock Exchange<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"107\" height=\"87\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2023\/07\/Market-Index-1600x1200-1.jpg\" alt=\"Market index\" class=\"wp-image-20985\"\/><figcaption class=\"wp-element-caption\">credit: marketbusinessnews.com<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/11\/16\/best-industry-specific-etfs\/\">Best 10 years returned industry-specific ETFs<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/11\/14\/power-of-index-etf\/\">The power of index ETFs underestimated<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/07\/10\/etf-regulations\/\">Consequences of Index Fund and ETF Regulations and Restrictions<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/09\/26\/market-index-and-etf\/\" target=\"_blank\" rel=\"noreferrer noopener\">Market index and the market index ETF is not identical<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2025\/05\/29\/turn-to-passive-investment\/\">Investors turn to passive investment funds ETF and abandoning active investment funds<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/11\/12\/taiwanese-investors\/\">Taiwan vs US stock market &#8211; For Taiwanese stock investors investing in US stocks<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/08\/05\/5-high-yield-etfs-in-taiwan\/\">5 high-yield ETFs in Taiwan, irreversible trends, and how much do Taiwanese like it?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/07\/28\/taiwan-stock-index\/\">Taiwan stock index and the S&amp;P 500 index long-term return is almost equal<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/05\/08\/invest-in-us-stocks\/\">How to invest in US stocks? sub-brokerage, and fintech<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/11\/27\/currency-exchange-risk\/\">Should investors care about currency exchange risk when investing in US stocks?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/10\/23\/sp-500-vs-nasdaq-100-index\/\" target=\"_blank\" rel=\"noreferrer noopener\">S&amp;P 500 vs. Nasdaq 100 index, how to choose a market index?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/01\/02\/sp-500-next-year-return\/\">S&amp;P 500 index next year performance, based on last century record<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/01\/31\/buffett-return-rate\/\">Return rate comparison among Buffett portfolio, Berkshire stock price, S&amp;P 500 over the years<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/10\/31\/14481\/\">S&amp;P 500 P\/E ratio has been rising in the past century, S&amp;P 500 PE Ratio and Average Querier<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/01\/08\/2022-sp-500-constitutent-stock-performance\/\">2022 S&amp;P 500 Constitutent Stocks Performance<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/15\/taiwan-stock-exchange\/\" target=\"_blank\" rel=\"noreferrer noopener\">Querier to Annualized rate of return for Taiwan Stock Exchange<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/11\/sp-500-index-querier\/\" target=\"_blank\" rel=\"noreferrer noopener\">Querier to Annualized rate of return for S&amp;P 500 Index<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/25\/stock-worth-holding-forever\/\" target=\"_blank\" rel=\"noreferrer noopener\">S&amp;P 500 index, the only stock worth holding forever<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/29\/procter-gamble-pg\/\">Stocks Better than the S&amp;P 500, Procter &amp; Gamble (P&amp;G) <\/a><\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/08\/11\/a-table-comparing-index\/\" target=\"_blank\" rel=\"noreferrer noopener\">A table comparing S&amp;P 500, Nasdaq, Dow Jones, Philadelphia Semiconductor Index over the years since its inception and annualized returns<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/13\/top-10-etfs\/\" target=\"_blank\" rel=\"noreferrer noopener\">Top 10 ETFs and important major US stock market index<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/09\/25\/nasdaq-index-querier\/\">Querier to Annualized rate of return for Nasdaq Index<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/02\/08\/etfs-tracking-us-market\/\" target=\"_blank\" rel=\"noreferrer noopener\">US issued ETFs tracking US market is your best bet<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/12\/04\/u-should-invest-etfs\/\" target=\"_blank\" rel=\"noreferrer noopener\">Most investors should invest ETFs tracking broader market<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/07\/25\/stock-worth-holding-forever\/\" target=\"_blank\" rel=\"noreferrer noopener\">Investors should care annualized rate of return (IRR), How to calculate?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Market index and the market index ETF is different thing.<\/p>\n","protected":false},"author":1,"featured_media":20985,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46,45,23,28],"tags":[261,2,901,623,3,614,902,621,260,628],"class_list":["post-20984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-index","category-etf","category-taiwan-stock-market","category-us-stock-market","tag-261","tag-aapl","tag-dia","tag-ivv","tag-msft","tag-qqq","tag-soxx","tag-spy","tag-tsm","tag-voo"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/20984","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=20984"}],"version-history":[{"count":21,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/20984\/revisions"}],"predecessor-version":[{"id":40029,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/20984\/revisions\/40029"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/20985"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=20984"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=20984"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=20984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}