Investing in the Dow: A Guide to Dow Jones ETFs
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The Dow Jones Industrial Average, “Dow” or DJIA is a stock market index made up of 30 established, large companies listed on the S&P 500. Charles Dow and Edward Jones launched the Dow in 1896. Companies are selected for their history of profitability, consistent performance and significance to an industrial sector .
Important Dow characteristics include:
Holdings: These are the companies that make up the Dow. Non-transportation or non-utility companies are eligible. (Dow Jones offers separate transportation and utility indices.) Current top Dow holdings include financial services, health, retail and technology companies such as the Goldman Sachs Group Inc., the Microsoft Corp. and UnitedHealth Group Inc.
Market capitalization: This refers to the "size" of a company, which is measured by multiplying the number of stock shares the company has issued by its current stock price. Companies in the Dow are large and typically have a market capitalization in the hundreds of billions of dollars.
Price-weighting: The Dow is a price-weighted index, meaning companies with higher stock prices influence the index's performance more.
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Dow ETFs
Three Dow exchange-traded funds (ETFs) are available for purchase. However, unlike S&P 500 ETFs, which are all structured similarly to track the performance of the S&P, two of the three ETFs below have a different focus, composition and yield. Here’s how to keep them straight.
If you’re looking for a way to invest in the index as closely as possible, the best option would be the SPDR Dow Jones Industrial Average (DIA) ETF.
The Invesco Dow Jones Industrial Average Dividend (DJD) ETF also replicates the DJIA but differs in that it weighs stocks by dividend yield rather than price, making this a good choice for dividend investors.
The iShares Dow Jones (IYY) ETF may be a good option for investors looking to add Dow companies as well as broaden exposure to mid-size and large U.S. companies.
Below, they are ranked from largest to smallest assets under management.
Fund Name (Ticker) | Expense Ratio | Annualized 5-Year Return | Assets Under Management (AUM) |
|---|---|---|---|
SPDR Dow Jones Industrial Average ETF Trust (DIA) | 0.16% | 10.16% | $35.18B (as of July 16, 2024) |
iShares Dow Jones U.S. ETF (IYY) | 0.20% | 14.20% | $2.04B (as of July 16, 2024) |
Invesco Dow Jones Industrial Average Dividend ETF (DJD) | 0.07% | 8.67% | $290M (as of July 16, 2024) |
Dow Jones index today
Here's how the Dow Jones Industrial Average is doing today.
Data is from Google Finance and may be delayed, and is for informational purposes only.
How to choose a Dow Jones ETF
You can also consider comparing and selecting Dow ETFs based on their objectives, expense ratios, price, return (or yield), and trading costs:
Expense ratios: The costs associated with managing the ETF.
Price: The cost of purchasing a share of the ETF.
Return (or yield): The income and growth generated by the ETF. Because returns can vary year to year, we consider the five-year return to get a snapshot of the ETF’s long-term performance.
Once you decide which Dow ETF to invest in, the next steps would be to open a brokerage account, fund it, place your trade and track your investment.
» Learn more about how to invest in ETFs
All Dow companies are also blue-chip companies, known for being valuable, reliable, and leaders in their industries. Learn more about blue-chip stocks.
Should a Dow ETF be a part of your portfolio?
Dow ETFs could be a beneficial addition to a portfolio if you’re looking to build out investments in established companies with a strong performance record. These companies can also provide fixed income to investors through stock dividend payments.
While Dow companies serve as indicators of industry health, it's important to remember that the Dow is a narrow snapshot of the market, focusing on a specific type of large and established company. The Dow is less diversified than indices like the S&P 500, which include many more companies.
The bottom line: Adding a Dow ETF to your portfolio may improve your exposure to large, established companies and provide you with dividend payments. But a Dow ETF alone doesn’t make a diverse investment portfolio.
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