Compare the best Dow Jones Industrial Average ETFs
This page will take you through how to invest in the Dow Jones with Exchange-traded funds (ETFs). These have become one of the most popular methods for investing in indices like the Dow Jones, as they’re one of the easiest, least expensive methods for doing so.
The Dow Jones contains 30 stocks that are listed on exchanges across the US, and a Dow Jones ETF gives you exposure to all 30. Keep reading to gain a better understanding of the ins and outs of Dow Jones ETF investing, and to see if it’s the right option for you.
Best Dow Jones ETFs
You’ll find many different ETFs that track the Dow Jones index. The best ones are covered in the table below. Some of the most prominent Dow Jones ETFs that we cover are:
|1||SPDR Dow Jones Industrial Average ETF (DIA)|
|2||iShares Dow Jones US ETF (IYY)|
|3||ProShares UltraPro Dow30 (UDOW)|
|4||ProShares Ultra Dow30 (DDM)|
|5||Invesco Dow Jones Industrial Average Dividend ETF (DJD)|
Brokers offering Dow Jones ETFs
Lots of different online brokers will enable you to trade Dow Jones ETFs. Here are the best of the bunch:
What is a Dow Jones ETF?
A Dow Jones ETF is an exchange-traded fund (ETF) that follows the performance of the Dow Jones index. With a Dow Jones ETF, you’re able to invest in the performance of the index, but still keep the flexibility that comes with being able to trade your investment freely on an exchange.
Similarly to the S&P 500 ETFs, the Dow Jones is often viewed as a proxy for the US stock market and a good indicator of the health of the American economy. Two of the biggest differences between the Dow Jones and S&P 500 are the number of stocks in each index (30 vs. 500) and the S&P 500 being heavier in technology offerings compared to the Dow’s greater focus on industrial stocks.
Examples of prominent Dow Jones ETFs include the DIAMONDS Trust, and the ProShares Ultra Dow30.
Is it a good investment?
That depends on your specific investing goals. Dow Jones ETFs can be useful for investors who seek less volatility than you’ll typically find in individual stocks. The size and stability of the Dow Jones index also means it’s very unlikely you’ll have to worry about large-scale disasters such as company insolvency.
A Dow Jones ETF offers the benefit of diversification, since it tracks the performance of all 30 stocks in the index at once. ETFs are also cheaper to trade than mutual funds (another common way of investing in indices), which require investors to pay management fees to fund managers. You can invest in and trade ETFs in a variety of different ways, whether your investing goals are geared toward the short term or the long haul, as you can either hold your ETF long-term, or trade it for quicker profits.
As with any investment asset, a Dow Jones ETF comes with risk. Volatile market conditions, like the kind experienced in the first half of 2020, can shake up even blue-chip stocks like the ones contained in the Dow. Get to know about ETFs before investing your money in a Dow Jones ETF, then evaluate the prevailing condition of the stock market before taking the plunge.
How do I trade Dow Jones index ETFs?
In order to trade Dow Jones ETFs, you’ll need to sign up with a broker that offers ETF trading. Here are three important steps to consider when mulling the purchase of a Dow Jones ETF:
- How to choose an ETF
- How to choose a broker
- Use our top tips to succeed
1. How to choose an ETF
There are numerous different ETFs you can invest in that are pegged to the Dow Jones index, including the well known DIAMONDS Trust. Here’s a look at some key factors to consider when investing in ETFs:
- Total value of assets. An ETF should have a minimum level of assets, with $10 million as a common minimum threshold for investors. Without that minimum, investor interest tends to fall. The result is limited liquidity and wide price spreads, both of which are undesirable traits for an ETF.
- Charges and fees. ETFs generally charge low fees, with an average expense ratio of just 0.44% – meaning you pay just $4.40 in annual fees for every $1,000 that you invest. By comparison, the average traditional index fund carries a higher expense ratio of 0.74%.
- Daily trading volume. The most popular Dow Jones ETF carries an average daily volume of around 4.5 million. There’s no set rule for how much volume you want the ETF you’re trading to have, but you do generally want to see fairly robust volume, since that tends to make your ETF more stable and less prone to wild price swings.
- Performance over time. Look for the Dow Jones ETFs that have the strongest track record when trying to forecast future results.
- Liquidity. ETF liquidity refers to both the volume of units traded on an exchange, and the liquidity of individual securities within an ETF’s portfolio. Individual Dow Jones stocks all have high liquidity, so it’s that first factor you want to scrutinize when choosing a Dow Jones ETF to buy.
- Whether it pays dividends. The main goal when buying a Dow Jones ETF is price appreciation of the ETF itself. Still, a nice fringe benefit is when the ETF you buy also pays dividends, which some ETFs do by collecting the dividends offered by whichever of the 30 individual Dow Jones stocks offer them.
- Location and tax status. Where ETFs are based can affect their tax status. If you’re evaluating two Dow Jones ETFs with similar track records and one of them is based in a lower-tax jurisdiction, it may be best to choose that one.
- Leverage. Leverage refers to an investor’s ability to put down just a small percentage of the total trade, with your broker putting down the rest. Certain Dow Jones ETFs offer leverage as a trading option. Keep in mind, though, that leverage is designed to be more of a short-term trading tool. It’s also only recommended for more experienced traders, as it can produce very large losses in a short amount of time if you guess wrong.
2. How to choose a broker
If you want to trade Dow Jones ETFs, then you’ll need to find a broker that can facilitate these trades. There are a wide variety of different online trading platforms from which you can choose, so we’ve compiled this list of what you want to look out for when selecting the right broker for you.
- What services they offer. The first step you need to check is that the broker you have selected offers ETF trading, and whether – if so – you’ll be able to use the platform to buy and trade ETFs. Beyond this you might want to check other trading options the broker offers, such as how much leverage you can trade with.
- Whether the platform offers a demo account. If you’re new to ETF trading, then it’s wise to start off with a demo account. These are offered by many brokers and allow you to place trades without risking any of your capital. You won’t make any money with a demo account, but using one to learn the ropes can prevent losses later on.
- The fees charged. Trading ETFs often incurs fees, and these will vary from broker to broker. Sometimes there’ll be a flat rate for making trades, and sometimes brokers will charge commission. Check out the fees charged by a broker before signing up to their service.
- Financial limits. Brokers will often apply a variety of limits to users’ trading activities. This can include deposit/withdrawal minimums and maximums or daily ETF trading limits. Make sure you pick a provider that can cater to the level of trading you’re looking to be doing.
- Security features and regulation. When investing your money with a platform, you want to ensure that it is reputable, complies with relevant legislation, and has good online security features. You can find reliable brokers by looking through our reviews, or simply follow the links to brokers that are listed on this page.
3. Use our top tips before investing
Before investing in Dow Jones ETFs, follow these steps:
- Do your research. Study the different types of Dow Jones ETFs available, then compare each one to your preferred goals. Examples of key decision-making factors can include transaction fees and liquidity.
- Set a budget. Setting a budget can help you strip emotions out of trading ETFs, since you’ll make sure not to put down more than you can afford to lose. Managing your budget also enables you to have plenty of money left over for future trades, even if you falter when you’re getting started.
- Select the right platform. We’ve reviewed all the best platforms that offer ETF trading on our site to help you make the right choice.
- Grow your investments over time. It’s ok to start slow, especially if you’re a beginner investor. It’s best to venture smaller amounts of money to start; you can always grow the size of your trades over time.
- Think long-term. While Dow Jones ETFs can be used for shorter-term trading, there’s plenty of potential for bigger long-term gains. Those long-term gains depend on the condition of the broad market. Buying during a bull market improves your odds of success.
What should I do now?
Ready to trade? Great! Simply choose the best Dow Jones ETF broker for your needs. Need more time first? Read the many trading courses and timely news updates offered at Invezz.com.
Try some of our investment courses for beginners
Reading one article might not be enough to give you all the information you want. Our investment courses will help you learn a lot more, so that you’ll be in a good position to make money when trading Dow Jones ETFs.