Getting a Handle on Dow ETFs as DJIA Eyes 20,000

The Dow Jones Industrial Average was one point short of 20,000 on Friday, bringing renewed attention on the storied benchmark index and related exchange traded funds.

The Dow Jones Industrial Average, or simply the Dow, rose to as much as 19,999.63 on Friday or just shy of the widely anticipated 20,000 landmark as a strong jobs report helped further fuel the post-election rally.

The equities rally has been bolstered by hopes of business-friendly policies under a new Donald Trump administration after the President-elect promised to enact $1 trillion in infrastructure spending, corporate tax cuts and potentially repeal regulatory hurdles. Furthermore, many anticipate earnings to return to growth after five consecutive quarters of declines, especially with energy stocks rebounding on rising crude oil prices and the strengthening economic outlook.

With the renewed focus on the Dow, ETF investors have also jumped on the momentum with Dow-related ETFs, such as the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA), which tracks the Dow Jones Industrial Average, and the Guggenheim Dow Jones Industrial Average Dividend ETF (NYSEArca: DJD), which weighs the 30 Dow stocks by yield.

Potential investors, though, should be aware that the Dow isn’t like your normal market capitalization-weighted index, such as the S&P 500. The major difference between the two indices is found in their indexing methodology. The Dow focuses on a price-weighted average of 30 stocks while the S&P 500 is a market capitalization-weighted index of 500 large companies.