The SPDR Dow Jones Industrial Average ETF Trust (DIA +0.14%) offers investors a unique way to gain exposure to one of the oldest and most iconic stock market indexes: the Dow Jones Industrial Average.
NYSEMKT: DIA
Key Data Points
While most beginner investors are familiar with exchange-traded funds (ETFs) tracking the Nasdaq-100 or the S&P 500, the SPDR Dow Jones Industrial Average ETF Trust provides an alternative option for those seeking to invest in this time-tested benchmark.
Despite flying under the radar compared to its Nasdaq and S&P counterparts, this fund is a sizable and highly liquid ETF with distinct features that may appeal to certain types of investors.
If you're interested in owning a portfolio of blue chip value stocks, the DIA ETF could be worth considering. Here's what you need to know.
Exchange-Traded Fund (ETF)
What is the SPDR Dow Jones Industrial Average ETF (DIA)?
The SPDR Dow Jones Industrial Average ETF Trust (DIA) is a passive ETF that tracks the Dow Jones Industrial Average, one of the oldest and most recognized stock market indexes in the world.
The index itself is a narrow benchmark of just 30 prominent U.S. companies, selected by a committee. These companies are chosen based on subjective criteria, including their size, liquidity, profitability, and overall importance to the economy.
Unlike the S&P 500, the Dow Jones Industrial Average isn't market cap–weighted. Instead, it uses a price-weighted methodology, meaning companies with higher share prices receive greater weight in the index.
While price weighting is considered an outdated indexing method, it remains a legacy carryover from the Dow's early days when calculations were done manually with pen and paper.
The SPDR Dow Jones Industrial Average ETF Trust (DIA) is structured as a Unit Investment Trust (UIT), a prototype ETF design. Unlike more modern ETFs, a UIT cannot reinvest dividends internally. Instead, it must hold dividends in cash until they are distributed to shareholders.
How to buy the SPDR Dow Jones Industrial Average ETF Trust (DIA)
- Open your brokerage app: Log into your brokerage account where you handle your investments.
- Search for the ETF: Enter the ticker symbol "DIA" or the ETF name into the search bar to bring up the ETF's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this ETF.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Should I Invest in the SPDR Dow Jones Industrial Average ETF Trust (DIA)?
The Dow Jones Industrial Average is an outdated index that doesn't hold up against modern benchmarks. With only 30 stocks and a price-weighted structure, it lacks the diversification and sensibility of market cap-weighted indexes like the S&P 500.
For example, the SPDR S&P 500 ETF Trust (SPY +0.33%) provides exposure to 500 companies with a broader sector allocation and a methodology that better reflects the overall U.S. stock market.
That said, this Dow Jones ETF does have its niche uses. Some investors may find it appealing if they specifically want concentrated exposure to 30 blue chip stocks. Additionally, it can serve as a useful trading tool for short-term strategies or as a tax loss harvesting partner for S&P 500 ETFs since the holdings overlap but aren't identical.
For long-term investors, however, this SPDR fund is rarely the best ETF choice compared to broader and more diversified ETFs.
What is the SPDR Dow Jones Industrial Average ETF Trust (DIA)'s expense ratio?
This ETF has an expense ratio of 0.16%. An expense ratio represents the annual fee charged by the fund, expressed as a percentage of your investment.
This fee is not paid upfront; instead, it's deducted from the fund's returns, effectively reducing its performance over time. With an expense ratio of 0.16%, a $10,000 investment would cost you $16 per year.
While this might seem like a small amount, it adds up over time, especially when compared to lower-cost S&P 500 ETFs that go as low as 0.03%.
ETF Expense Ratio
Historical performance of the SPDR Dow Jones Industrial Average ETF Trust (DIA)
Here's a look at how this ETF has performed over various trailing time periods. All figures represent total returns (i.e., with dividends reinvested).
Metric | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|
Net Asset Value | 11.17% | 18.68% | 13.03% | 13.47% |
Market Price | 11.19% | 18.67% | 13.03% | 13.48% |
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The bottom line on SPDR Dow Jones Industrial Average ETF Trust (DIA)
This Dow Jones ETF has several positives. It offers a portfolio of high-quality blue chip American stocks with a value tilt, pays monthly dividends, and boasts excellent liquidity and size.
That said, its drawbacks may outweigh the benefits for some. The lack of diversification, outdated price-weighting methodology, and a 0.16% expense ratio -- while reasonable -- are relatively high compared to more diversified and modern S&P 500 ETFs.
Ultimately, DIA may be better suited as a satellite holding or trading tool rather than a core portfolio investment.
