The Dow Jones Industrial Average (DJIA) is the granddaddy of all stock indexes. Often called the Dow, this index began in 1896 and is considered the primary indicator of the health of Wall Street and the broader financial market. It is made up of only 30 stocks, but they are considered the best blue chip stocks in the United States.
You can invest in the DJIA without buying all 30 stocks by buying exchange-traded funds (ETFs) that track the Dow. We have chosen three ETFs that attempt to mimic or beat the Dow’s performance.
These ETFs were selected based on their year-to-date returns as of March 9, 2017. All other figures listed are also current as of March 9th, 2017. Here is how they break down:
SPDR Dow Jones Industrial Average ETF (DIA)
DIA is a reliable ETF for replicating the performance of the Dow. It was launched in 1998 and has a history of tracking the index accurately. This ETF invests in all the stocks of the Dow, and weights them in a manner that is similar to the weights in the underlying index.
Investors in DIA don’t expect to beat the market; they seek to match it. It should be noted that as stable as the Dow is, it of course has its ups and downs. That means buying DIA to track the Dow is not a guaranteed way to make money in the short-term.
However, since its inception the Dow has always risen over the long term. Unless you think the market is going to be destroyed and go to zero, DIA is a reliable way to grow your money over time. (See also: S&P 500 Vs. Dow Jones ETF: Which is a Safer Investment?) For others, it is a relatively safe place to park money for the long term.
- Avg. Volume: 3,817,813
- Net Assets: $16.26 billion
- Yield: 2.17%
- YTD Return: 5.69%
- Expense Ratio: 0.17%
- Inception Date: January 13, 1998
- Since Inception: 7.63%
Elements Dow Jones High Yield Select 10 Total Return Index (DOD)
DOD is not as popular as DIA, but it has outperformed it since its inception. This ETF contains only 10 stocks at any given time based on the investment strategy known as Dogs of the Dow, but they change from time to time.
This kind of change in a portfolio is known as rebalancing. The criterion for rebalancing is dividend yield. The money manager of this ETF selects the Dow stocks that have the highest dividend yield. Note that the ETF itself does not pay out dividends to investors. Instead, it reinvests all stock dividends.
- Avg. Volume: 22,726
- Net Assets: $38.49 million
- Yield: 0.00%
- YTD Return: 25.34%
- Expense Ratio: 0.75%
- Inception Date: November 7, 2007
- Since Inception: 7.32%
ProShares Ultra Dow30 (DDM)
The Ultra Dow30 (DDM) is a leveraged ETF. The aim here is to beat the DJIA by seeking twice the daily performance of that index. Because DDM has the potential to double the underlying index’s gains, it also has the potential to double the losses.
Note that the year-to-date return is not twice the DJIA, and its return since inception is not the highest of these three ETFs. This indicates that over time, it has had large losses that offset its large gains.
- Avg. Volume: 245,565
- Net Assets: $334.71 million
- Yield: .97%
- YTD Return: 11.30%
- Expense Ratio: 0.95%
- Inception Date: June 19, 2006
- Since Inception: 11.93%
Part of any investor’s portfolio should be relatively stable. For those who like to take risks, it is always wise to keep part of your money safer than your speculative funds. ETFs that follow the DJIA are a good place to do just that. You can expect reasonable returns while avoiding the volatility of riskier sectors. (See also: Top 5 ETFs to Track the Dow by Volume.)