Started in over 120 years ago, 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 by many to be the foremost indicator of the health of Wall Street and the broader financial market. Unlike the S&P 500, which has a broader scope of stocks, the DJIA is made up of only 30 stocks, but they are puported to be the best blue-chip stocks in the United States.
The DJIA is organized so that a $1 move in any company’s stock price will shift the Dow average by the same degree. However, the Dow Jones is expensive to invest in outright, using futures for example. Fortunately, investors seeking to profit from a bullish perspective on the Dow can invest in a number of other ways, including using exchange-traded funds (ETFs) that track the Dow, to diversify their exposure. Here are several ETFs that track the Dow:
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. When most people think of an ETF to invest in, this is the one that comes to mind. DIA invests in all the stocks of the Dow and weights them comparatively to the underlying index. Expenses for DIA are also relatively low at 0.17%, allowing for minimal tracking error.
IYY seeks to track the investment results of the Dow Jones U.S. Index composed of U.S. equities. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index aims to consistently represent the top 95% of U.S. companies based on a float-adjusted market capitalization, excluding the very smallest and least liquid stocks. It has a lower 0.20% expense ratio and offers exposure to a broad range of large and mid-sized U.S. companies.
Investors bullish on the returns of the Dow can look at this leveraged ETF from ProShares. The Ultra Dow30 is a leveraged ETF that seeks to replicate two times the daily performance of the DJIA. 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 fund’s expense is a bit higher at 0.95%.
For more investing trends, visit ETFtrends.com.