S&P 500 ETF vs. Dow Jones ETF: What's the Difference?

S&P 500 ETF vs. Dow Jones ETF: An Overview

Exchange-traded funds (ETFs) that track the S&P 500 Index and the Dow Jones Industrial Average (DJIA) are some of the most widely traded ETFs in the market today.

Both ETFs have essentially the same amount of risk associated with them. The Dow ETF tracks only 30 companies, whereas the S&P ETF tracks all 500 of the S&P 500. Typically, these ETFs have a high degree of correlation, meaning they tend to move in the same direction much of the time. However, there are distinct differences between the two funds.

Key Takeaways

  • The SPY is the SPDR S&P 500 ETF, which tracks the 500 companies in the S&P 500 index.
  • The DIA is the SPDR Dow Jones Industrial Average ETF, which tracks the 30 Dow components.
  • Although the ETFs share some similarities, they track different indices and are constructed differently, so investors should understand the key differences.

The S&P 500 ETF

The SPDR S&P 500 ETF Trust (SPY) tracks 500 companies from the S&P 500 index. A committee chooses the companies included in the ETF, and as a result, the holdings can differ slightly from the S&P 500 index. The committee uses guidelines for its decisions, including liquidity, profitability, and balance. The committee meets regularly to review the index.

The S&P 500 Index is constructed using a weighted average market capitalization, which means larger companies have a greater weighting in the index. Market capitalization is the result of multiplying a company's stock price by the number of outstanding shares of stock. As a result of the weighting, companies with the largest number of shares and have a high stock price will carry a higher weighting.

The SPDR SPY has a low expense ratio of 0.0945%, which is the cost of managing the fund expressed in percentage terms. The fund has more than $434 billion in assets under management (AUM) as of Jan. 19, 2022.

Sector Weighting

Below are the SPY's top sectors that are represented along with the percentage of their weightings within the fund as of Jan. 19, 2022:

  • Information Technology: 28.21%
  • Health Care: 12.97%
  • Consumer Discretionary: 12.30%
  • Financials: 11.37%
  • Communication Services: 10.14%
  • Industrials: 8.01%
  • Consumer Staples: 6.02%
  • Energy: 3.25%
  • Real Estate: 2.66%
  • Materials: 2.58%
  • Utilities: 2.49%

Top Ten Holdings

Below are the SPY's top ten holdings as of Jan. 19, 2022:

SPY ETF’s Top 10 Holdings (as of Jan. 19, 2022)
Holding (Company) % SPY Portfolio Weight
Apple Inc. (AAPL) 6.83%
Microsoft Corp. (MSFT) 5.86%
Amazon.com Inc. (AMZN) 3.58%
Tesla Inc. (TSLA) 2.16%
Alphabet Inc. — Class A (GOOGL)  2.11%
Meta Platforms (Facebook) (FB) 1.94%
Alphabet Inc. — Class C (GOOG)  1.97%
NVIDIA Corp. (NVDA) 1.67%
Berkshire Hathaway Inc. — Class B (BRK.B) 1.51%
JPMorgan Chase & Co. (JPM) 1.15%
Source: State Street Global Advisors

Performance

Below is the performance of the SPDR S&P 500 ETF Trust (SPY) over the last few years as of Jan. 19, 2022:

Annualized Performance of the SPDR SPY versus S&P 500 Index
   SPY ETF  S&P 500 Index
One Year  28.52%  28.71%
Three Years  25.87%  26.07%
Five Years 18.30% 18.47%
Source: State Street Global Advisors

Liquidity and Risk

The SPDR SPY has a daily trading volume of more than 80 million shares depending on market conditions. The number of shares traded daily—called liquidity—is important since a higher number means there are plenty of buyers and sellers, allowing investors to get in and out of positions with ease.

The SPY has a fairly low risk with a beta of .98 although it can fluctuate. Beta is a measure of how much a security fluctuates in the market and its risk level. A beta of one means a security trades in line with the market. A beta of below one has low risk when compared to the market, and a beta above one is said to have a higher risk than the overall market. Since the SPY includes many companies in the market, its beta is usually close to one, meaning it moves in line with the market.

The Dow Jones Industrial Average ETF

The SPDR Dow Jones Industrial Average ETF Trust (DIA) tracks some of the largest companies in the U.S. whereby the companies that are included are chosen by a committee of editors from the Wall Street Journal. There are no technical rules for inclusion in the index. The component companies must be substantial enterprises that represent a significant portion of the economic activity in the U.S.

The DJIA contains 30 companies, compared to the 500 companies in the S&P 500. The DJIA is the second-oldest stock index dating back to 1896. The SPDR Dow Jones Industrial Average ETF is the largest ETF tracking the DJIA.

The DIA ETF has an expense ratio of .16%, which is low but slightly higher than the SPY. The DIA has over $30 billion in assets under management (AUM), which is more than $411 billion less than the SPY.

Sector Weighting

Some of the sectors that are represented in the fund as of Jan. 19, 2022, along with their weightings, include:

  • Information Technology: 21.65%
  • Health Care: 17.58%
  • Industrials: 15.78%
  • Financials: 15.57%
  • Consumer Discretionary: 14.35%
  • Consumer Staples: 7.71%
  • Communication Services: 3.83%
  • Energy: 2.41%
  • Materials: 1.12%

Top Ten Holdings

Below are the DIA's top holdings along with their weightings as of Jan. 19, 2022:

DJIA ETF’s Top 10 Holdings (as of Jan. 19, 2022)
Holding (Company) % DJIA Portfolio Weighting
United Health Group Inc. (UNH) 8.59%
Home Depot Inc. (HD) 6.83%
Goldman Sachs Group Inc. (GS) 6.60%
Microsoft Corporation (MSFT) 5.64%
McDonald's Corporation (MCD) 4.78%
Amgen Inc. (AMGN) 4.36%
Caterpillar Inc. (CAT) 4.28%
Salesforce.com Inc. (CRM) 4.21%
Boeing Company (BA) 4.19%
Visa Inc. Class A. (V) 4.02%
Source: State Street Global Advisors

Performance

Below is the performance of the SPDR Dow Jones Industrial Average ETF Trust (DIA) over the last few years as of Jan. 19, 2022:

Annualized Performance of DIA ETF versus DJIA Index
   DIA ETF  DJIA Index
One Year  20.73%  20.95%
Three Years  18.30%  18.49%
Five Years  15.34%  15.51%
Source: State Street Global Advisors

Liquidity and Risk

On average, approximately four million shares trade daily, depending on market conditions. The DIA has a slightly lower but similar risk level than the SPY, with a .79 beta.

The Correlation Between SPY and DIA

The SPY and DIA have a high degree of correlation, meaning that when the S&P 500 rises, so too does the Dow Jones and their respective ETFs. The high degree of correlation is due to the similar component companies of each index. The DJIA contains only very large companies.

Most of these companies are also included in the S&P 500. However, the weightings might be different, meaning the amount of money allocated to the companies will vary when comparing the two funds. Although the S&P 500 provides more diversification, the overall market tends to move in the same direction given economic conditions.

The Bottom Line

Whether the SPY is better than the DIA depends on the investor's investment objectives. If an investor is looking for a fund that's more heavily weighted in industrial companies, the DIA is a good choice.

On the other hand, if someone is looking for more technology and bank stocks, the SPY is a better choice given the weightings outlined above. However, it's important to note that the weightings can change over time.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. State Street Global Advisors. "SPDR Dow Jones Industrial Average ETF Trust." Accessed Jan. 19, 2022.

  2. State Street Global Advisors. "SPDR S&P 500 ETF Trust." Accessed Jan. 19, 2022.

  3. NASDAQ. "SPDR S&P 500 (SPY)." Accessed Jan. 19, 2022.

  4. ETF.com "SPY SPDR S&P 500 ETF Trust." Accessed Jan. 19, 2022.

  5. State Street Global Advisors. "SPDR Dow Jones Industrial Average ETF Trust." Accessed Jan. 19, 2022.

  6. Britannica. "Dow Jones Average." Accessed Jan. 19, 2022.

  7. ETF Database. "Largest ETFs: Top 100 ETFs by Assets." Accessed Jan. 19, 2022.

  8. ETF.com. "DIA SPDR Dow Jones Industrial Average ETF Trust." Accessed Jan. 19, 2022.

  9. NASDAQ. "SPDR Dow Jones Industrial Average ETF (DIA)." Accessed Jan. 19, 2022.

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