Can you buy shares in the Dow Jones Industrial Average (DJIA)?

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4 weeks ago

The Dow Jones Industrial Average (DJIA) is an index reflecting the average price of the 30 stocks included in the measurement. Therefore, as it is simply a calculated average, you cannot invest in the index itself. However, there are certain investment products available that yield similar results to the performance of the index.

Individual Stocks

You can purchase shares in each of the 30 companies currently included in the Dow Jones Industrial Average. While seemingly simple, this can be costly, with the price per share over $100 for many of the component companies. Then, you need to sell companies as they are dropped from the index and buy the replacement companies, as the Dow Jones changes periodically. For most investors, this is not a plausible way to invest.

Index Funds and ETFs

Instead, look for index funds linked to the Dow Jones or exchange-traded funds (ETFs) that track the index. Investing in these funds requires a far smaller initial cash outlay, while offering performance that mirrors that of the Dow Jones.

For example, the SPDR Dow Jones Industrial Average ETF (DIA), trades at roughly 1/100 of the Dow Jones index price. Your investment moves at a nearly identical percentage with the index, up or down. Some funds even offer the opportunity to play the Dow Jones in a bear market, like ProShares Short Dow 30 ETF (DOG). This fund moves in the opposite direction from the Dow Jones, so in a bear market, you can buy shares of DOG and see your share value increase as the Dow Jones falls.

No matter which you choose for your portfolio, and regardless of the time in the market, these funds make owning a piece of Dow Jones performance attainable.

October 2016
October 2016
October 2016
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October 2016