In this guide
- 1. How to Invest in Dow Jones Industrial Average Index Funds in 2024
- 2. How do I invest in the DJI index?
- 3. How much does it cost to invest in the Dow Jones Industrial Average index?
- 4. The different ways to invest in the DJI
- 5. Where can I invest in the Dow Jones Industrial Average index?
- 6. Should I invest in the Dow Jones Industrial Average index?
- 7. FAQs
How to Invest in Dow Jones Industrial Average Index Funds in 2024
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Putting your money into an index is a simple and convenient way to create an investment portfolio, especially if you’re just getting started with investing.
An index, like the Dow Jones Industrial Average, provides a snapshot of a particular section of the stock market, and by investing in it, you gain exposure to a diverse portfolio of stocks, which can help reduce risk compared to investing in individual companies.
One of the best ways to invest in the Dow Jones Industrial Average index is through Exchange-Traded Funds (ETFs). ETFs are designed to track the performance of an index and are highly convenient for beginners. They allow you to buy shares in the Dow Jones Industrial Average with just a few clicks.
Read on to learn how to invest in the Dow Jones Industrial Average effectively and explore the best methods to do so. Compare different investment strategies, available ETFs and index funds, and find out why Dow Jones Industrial Average index investing is a low-cost, relatively low-risk approach to growing your wealth over time.
How do I invest in the DJI index?
Copy link to sectionThe easiest way is to sign up to a stock broker, open an investment account, and buy shares in an Dow Jones Industrial Average ETF. This guide explains how to do it:
Step 1. Sign up to eToro
Copy link to sectionWe recommend using eToro to invest in Dow Jones Industrial Average. Create your trading account and deposit some money using a payment method of your choice.
This is a fairly quick process that takes just 15-30 minutes, but you need to supply a form of photo ID to verify the account before you can use it.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Step 2. Decide how to buy Dow Jones Industrial Average
Copy link to sectionThis boils down to choosing between an Dow Jones Industrial Average ETF or buying the stocks in the index manually. ETFs are generally better suited to investors who want to passively track the Dow Jones Industrial Average’s performance. Individual stocks offer a greater range of trading options and flexibility.
Step 3. Invest in the Dow Jones Industrial Average
Copy link to sectionSign into your trading account and search for the Dow Jones Industrial Average. Hit the ‘buy’ button and enter the details of your purchase, such as how much you want to spend. Hit ‘buy’ again to execute the trade.
Step 4. Monitor your investment
Copy link to sectionWhen you buy a stock, the trade goes through more or less instantly, and you’ll be able to see your new open position in your trading account. ETF purchases can take longer, and if you buy outside of traditional trading hours it won’t go through until the next morning.
Your trading account will show the price change in the Dow Jones Industrial Average since you bought it, so you can see your profit/loss at a glance. Use that information, along with your own research, to decide when to sell the Dow Jones Industrial Average and close your position, ideally at a profit!
How much does it cost to invest in the Dow Jones Industrial Average index?
Copy link to sectionFrom $0 to $5, depending on how you invest. For each option, you must consider the cost of buying the actual asset, whether that’s an ETF, index fund, CFD*, or share, plus the fees associated with it.
*Note that CFDs are not available to US investors.
| Asset | eToro fees | Plus500 fees | Public fees |
|---|---|---|---|
| Cryptocurrencies | 1% | From 2% | 1-2% (spread) |
| Commodities | From 2 pips | From 0.04% | – |
| Currencies | From 1 pip | From 0.8% | – |
| Indices | From 0.75 pts | From 0.7% | – |
| Stocks | 0% commission | From 0.08% | Spreads |
| Stock CFDs | 0.15% | – | – |
| ETF CFDs | 0.15% | – | – |
| View more > | eToro > | Plus500 > | Public > |
ETFs and CFDs are generally the cheapest option overall, as they have low fees and a low minimum investment. Index funds and mutual funds have low fees but may have a high minimum investment. Buying individual stocks is the most expensive option in absolute terms, because the share price of a single large company is often more than $100.
All options are likely to include a trading fee, which you pay each time you make a transaction. Some trading platforms offer zero-fee trading, with others it may be a few dollars.
Then ETFs and index funds each have their own expense ratio. Expense ratios refer to an annual management fee, charged as a percentage of your total investment. Expense ratios are usually no more than 0.05%, so if you invest $1,000, you would pay $5 per year in management fees.
The different ways to invest in the DJI
Copy link to sectionAs we mentioned above, there are numerous ways to put your money into the Dow Jones Industrial Average. ETFs and individual stocks are the simplest options for beginners, but there are alternatives. Here’s a brief overview of each option and who it’s best suited for.
Dow Jones Industrial Average ETFs
Copy link to sectionAn ETF (exchange-traded fund) is an investment fund traded on a stock exchange, much like a stock. Exchange traded funds can hold different assets, such as individual stocks, bonds, or commodities, or serve as a proxy for a stock market index.
An Dow Jones Industrial Average ETF is one way of investing in the Dow Jones Industrial Average. It’s simply an investment fund that mirrors the performance of the Dow Jones Industrial Average. When you buy shares in the fund, the value of your investment will rise or fall with the Dow Jones Industrial Average itself.
ETFs are ideal for new investors because they have a very low minimum investment. You can start with a few pounds and get exposure to some of the world’s largest companies. They’re also practical if you plan on trading the Dow Jones Industrial Average index, because you can buy or sell shares in the fund throughout the day.
Dow Jones Industrial Average index funds
Copy link to sectionAn index or mutual fund is an investment fund that aims to track the performance of a stock market index, such as the Dow Jones Industrial Average. It’s very similar to an ETF, in that there are low management fees and you can buy shares through your online broker.
However, there are a couple of differences. Dow Jones Industrial Average index funds are only priced at the end of each trading day, so you can buy or sell shares in the fund once per day. There may also be a higher barrier to entry, through a much larger minimum investment when you invest in Dow Jones Industrial Average index funds.
That means an Dow Jones Industrial Average mutual fund is better suited for long term investors with a higher initial budget, where the infrequent trading and barriers to entry are far less of an issue.
Dow Jones Industrial Average CFDs (non-US users only)
Copy link to sectionCFDs (contracts for difference) are a way to speculate on Dow Jones Industrial Average price changes with more flexibility than if you use an ETF or index fund. A CFD is a ‘derivative’, which means it gets its value from the underlying asset – in this case the Dow Jones Industrial Average – but it’s separate from it.
As a result, CFDs can be leveraged, where you borrow money to multiply the size of the trade, or they can be used to go ‘short’, where you place a trade on the index to fall in value. You can also buy and sell them outside of regular trading hours.
All of this means Dow Jones Industrial Average CFDs offer the potential to outperform a fund that passively tracks the Dow Jones Industrial Average’s performance. Of course, you can also underperform it as well. Tools like leverage and shorting introduce a lot more risk, and are best left to experienced traders.
Dow Jones Industrial Average futures
Copy link to sectionFutures contracts are agreements to buy or sell the DJI at an agreed price on a set date in the future. Dow Jones Industrial Average futures are a means to predict how you think the index is going to perform over a set time frame, such as the next three or six months.
Most futures contracts involve leverage, so you only put up a small part of the total trade value (the margin) when you buy one. That makes futures more risky, and they require a bit more financial expertise to understand as well.
Some traders use futures as a hedge against the performance of stocks they own. For instance, if you own stocks that are part of the Dow Jones Industrial Average then you might want to short the Dow Jones Industrial Average so that you still make some money if the price falls.
Dow Jones Industrial Average stocks
Copy link to sectionAnother way to invest in the Dow Jones Industrial Average is to buy shares in the individual stocks that the index tracks. It isn’t practical to buy every share in the index, but you can invest directly into a few of the most heavily weighted stocks in the Dow Jones Industrial Average in order to get broad exposure to its performance.
The most heavily weighted stocks in the Dow Jones Industrial Average tend to be the largest companies by market capitalisation. If you invest directly in those largest stocks, you gain exposure to the index without taking on the risk of all the underlying companies.
One reason to do this is that these larger companies with the highest market cap dominate the index anyway, so that it can give you the impression of a diversified portfolio while actually being reliant on the performance of those particular stocks.
The flip side of investing directly like this is that you lose the diversification and stability that comes with buying into an entire index. It requires much more hands-on management to do your own stock picking, so it’s best suited to more experienced investors.
Where can I invest in the Dow Jones Industrial Average index?
Copy link to sectionAccording to our expert research, eToro is the best ETF broker to invest in Dow Jones Industrial Average index funds.
Both Dow Jones Industrial Average ETFs and Dow Jones Industrial Average CFDs are available to invest in through eToro .
Here are three more places to buy the Dow Jones Industrial Average, ranked according to their cost, security, and features.
We found 4 online brokers for users based in
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Buy or sell stock CFDs with Plus500. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
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Should I invest in the Dow Jones Industrial Average index?
Copy link to sectionYes, Dow Jones Industrial Average investing is a great choice if you’re looking for a safer investment with more price stability compared to picking individual stocks. It’s also ideal if you don’t have the time to actively manage a portfolio of stocks, because you can simply invest in a bunch at the same time and then leave it alone.
The flip side is that you have less control over which companies you invest in. An index committee decides how the index works, and you can’t pick and choose the underlying companies you like the most. The Dow Jones Industrial Average is better suited to hands-off investors, compared to those who have the skills, experience, and desire to pick their own stocks.
What are the advantages of investing in the Dow Jones Industrial Average index?
Copy link to sectionAn index provides instant stock market diversification, where you spread your risk across a large number of underlying companies, rather than one or two. Here are some more reasons why you might want to invest in the Dow Jones Industrial Average index:
- The DOW gives you exposure to the top US companies. The DJIA index comprises the largest publicly traded companies in the United States. These businesses are considered the best and most stable in the world, and investing in the DOW index provides investors with exposure to them.
- The DJIA is stable and reliable. The Dow Jones Industrial Average is a reliable indicator of how well the US economy is performing. It has a long history of stability and consistent performance.
- DOW ETFs and funds offer good liquidity. As the DJIA is such a popular index, funds and ETFs that track it are generally large in size. This makes it easy to buy and sell shares at any time during market hours, which is difficult when investing in a smaller index.
- The DOW is a long history of good performance. Not only is the Dow Jones index stable, it is also a good performer. Since 2000, the DJIA has only really moved in one direction, up, and has returned over 200% to investors.
What are the disadvantages of investing in the Dow Jones Industrial Average index?
Copy link to sectionThe main risk of investing in the Dow Jones Industrial Average is that all the underlying companies are related in some way, so a broader economic downturn that affected the entire country would likely affect many stocks in the index at the same time. Here are some more risks of Dow Jones Industrial Average investing.
- The DJIA is spread thinly across industries. The largest US companies belong to a few sectors, such as technology and healthcare. This means the DOW is less diverse than other indexes, such as the S&P 500, which provides a wider range of industries.
- It uses a price-weighted methodology. The Down Joines Industrial Average uses a price-weighted methodology which means some larger companies have a disproportionate impact on their performance compared to actual market cap. This can result in a skewed representation of the overall market.
FAQs
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