Investors can use Index Funds or Exchange Traded Funds to track the performance of the Dow Jones Index. The Dow Jones ETF is one of the cheapest option for investors to gain exposure to a group of mature and blue chip stocks compared to actively managed funds.
Dow Jones Index History
Dow Jones Industrial Average index is formed based on the price of 30 selected US listed stocks. The Dow Jones Index was created in the early 1900 by Charles Dow. At the time conservative investors focused on bonds and stocks were known to be speculative investment for investors much equivalent to how investors sees penny stocks today.
Throughout the 1900’s and into the 2000 as investment funds shifted towards stock markets. The Dow Jones Index has become the fabric of the investment landscape where the first instance investors want to know “what happened to the market today” they look towards the Dow Jones Index.
The original index was created with less than 15 stocks and overtime the index curators expanded the list of Dow stocks to 30 in 1928. While the components of the Dow Jones Index has changed over time, the total number of stocks in the DJIA today remains the same.
Although 30 stocks can be considered relatively concentrated for a portfolio. Investors can see below that the Dow Jones Industrial Average stocks spreads across a number of industry sectors so the overall index is not overly dependent on specific stock or sector performance.
Dow Jones Components Today
The combined market capitalization of the list of dow stocks account for almost half a trillion dollars. This is pretty amazing as 30 stocks are included in the Dow Jones Industrial average stock list. The table below shows the Dow Jones Index components by Stock and its Industry, percentage of index and market capitalization.
The pure size of the index reinforces the history of the Dow Jones index. However there has been a shift in the active fund manager preferences where they have now prefers S&P 500 vs DJIA today as a better indicator and representative of the broader US equity markets.
Dow Jones Index ETF List
|ETF||ETF Description||Expense Ratio|
|DIA||Dow Jones Industrial Index||0.17%|
|DXD||2X Inverse Dow||0.95%|
|UDOW||3X Inverse Dow||0.95%|
The Table shows SPDR Dow Jones Industrial Average Index (DIA) with the lowest expense in replicating the performance of the Dow Jones Industrial Average. The performance of DIA should be an exact return of the index. See our Inverse Market ETF note to see the other inverse ETF tracking S&P 500 and NASDAQ.
Short Dow ETF
The other Dow Jones Index ETFs above seek to replicate the inverse performance of the DJIA ETF. They are what is commonly known as leveraged and inverse funds.
- Proshares Short Dow 30 (DOG) is an inverse market ETF.
- DOG look to return performance opposite of the Dow Jones Industrial average stocks
- DXD and UDOW target to track 2 times and 3 times inverse return of the index.
- Expense ratio of inverse DJIA ETF is 4 times the traditional index tracking funds
Dow Jones Industrial Average Stocks List
|American Express||Consumer finance||3.37%|
|Boeing||Aerospace and defense||4.98%|
|Caterpillar||Construction and mining equipment||4.07%|
|Chevron||Oil & Gas||4.85%|
|Cisco Systems||Computer networking||0.89%|
|ExxonMobil||Oil & Gas||3.93%|
|Goldman Sachs||Banking, Financial services||6.22%|
|The Home Depot||Home improvement retailer||3.19%|
|IBM||Computers and technology||6.22%|
|Johnson & Johnson||Pharmaceuticals||3.90%|
|Procter & Gamble||Consumer goods||3.19%|
|UnitedHealth Group||Managed health care||2.91%|
|Walt Disney||Broadcasting and entertainment||3.09%|
The above list of Dow Stocks shows the index is broadly diversified even though it is commonly known as the Industrial Index. One note is that the index does not include Transport and Utilities which have their own Dow Jones indexes. These two also have a special place with investors as they form the famous Dow Theory which some investors think can signal market tops.
Chart below highlight the top 5 largest sectors Oil & Gas (14%), Pharmaceuticals (13%), Conglomerate (10%), Software (7%) and Retail (5%). The remaining sectors account for 51% of the Index.
Dow Jones Index History
DJIA today for what it is, a major market index is because of the strong historical relationship to overall equity market development. Historical performance shows that it tracks closely with the S&P 500. Chart below shows the 5 year performance of the Dow Jones Industrial Average.
NASDAQ not surprisingly has outperformed both ETFs tracking DJIA and S&P 500. However with any investment. Higher returns means higher risk. A more comparable benchmark is the S&P 500.
Over the last 10 years it has outperformed the index by 5%. The average annual return of the index since late 1990’s is around 7% so a 5% outperformance equals almost an additional year of returns.