The Dow Jones Industrial Average (DJIA) is considered 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 to be the best blue-chip stocks in the United States.
Year-to-date as of May 4, 2019, the DJIA has returned 8.43%. The outlook for the rest of 2019 continues to be bullish with markets stabilizing and catalysts such as U.S. tax reform helping to fuel continued corporate earnings growth.
However, the Dow Jones is expensive, and investors seeking to profit from a bullish perspective on the Dow can invest in the index—without buying all 30 stocks—by buying exchange-traded funds (ETFs) that track the Dow to diversify their exposure.
- Many investors choose to invest in ETFs that track the DJIA instead of investing in the individual companies that comprise it.
- All of the ETFs listed have outperformed the index year-to-date.
- Even for blue-chip indexes like the Dow, exchange-traded funds protect investors by diversifying their holdings.
- Leveraged instruments that imitate double or triple the price movements of the index should only be traded by experienced investors.
These ETFs were selected based on their investment strategy and 2018-2019 returns. All figures were updated on May 4, 2019.
SPDR Dow Jones Industrial Average ETF (DIA)
The SPDR Dow Jones Industrial Average ETF 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 similar to the underlying index. Expenses for the ETF are low at 0.17% allowing for minimal tracking error.
- Price: $264.97
- Avg. Volume: 3,442,711
- Net Assets: $22.36 billion
- Yield 2.05%
- YTD Return 13.48%
- Expense Ratio: 0.17%
The ETF’s three-year annualized total return was 16.20%. While equities are considered to be volatile, blue-chip Dow stocks are often looked to as a reliable investment and this ETF can be a good way to accumulate capital gains over the long term.
ProShares Ultra Dow30 (DDM)
Investors bullish on the returns of the Dow have two leveraged options from ProShares. The Ultra Dow30 is a leveraged ETF that seeks to replicate two times the daily performance of the DJIA.
- Price: $48.29
- Avg. Volume: 739,474
- Net Assets: $363.91 million
- Yield: 0.77%
- YTD Return: 26.28%
- Expense Ratio 0.95%
The fund invests in a number of securities to achieve its objective. Investments include equity securities from the index, derivatives including SWAP agreements and futures contracts, and money market instruments for short-term cash management. The ETF’s three-year annualized total return was 29.25%.
ProShares UltraPro Dow30 (UDOW)
The ProShares UltraPro Dow30 is another leveraged option for investors bullish on the return prospects of the Dow. This fund uses leverage to replicate three times the daily performance of the DJIA.
- Price: $102.34
- Avg. Volume: 993,582
- Net Assets: $525.47 million
- Yield: 0.62%
- YTD Return: 40.67%
- Expense Ratio: 0.95%
ProShares Dow30 leveraged ETFs use equity securities from the index, derivatives including SWAP agreements and futures contracts, and money market instruments for short-term cash management to achieve the enhanced performance objective. The ETFs three-year annualized return was 42.95%.
ELEMENTS Dogs of the Dow (DOD)
The ELEMENTS Dogs of the Dow Linked to the Dow Jones High Yield Select 10 Total Return Index is another exchange-traded option for investors seeking to gain from appreciation in Dow 30 stocks.
- Price: $25.65
- Avg. Volume: 2,061
- Net Assets: $50.03 million
- Yield: N/A
- YTD Return: 12.79%
- Expense Ratio: 0.75%
Instead of investing in all 30 index components, this fund invests according to the popular Dogs of the Dow strategy which centers on the top dividend-paying stocks in the DJIA for each year.
It is reconstituted annually to include the ten highest dividend paying stocks in the index. Thus, the returns rely on the top blue-chip dividend payers for the year.
There are numerous funds in the market that seek to follow a Dogs of the Dow strategy. The ELEMENTS fund is complex in its construction. It is structured as an exchange-traded note (ETN) and doesn’t pay out the dividends but rather reinvestments them in the fund. The three-year annualized total return of the fund was 11.17%.