If the S&P 500 measures the health of one asset class (large-cap U.S. stocks), then the 30-stock Dow Jones Industrial Average is an even narrower barometer of market conditions.
“Many investors incorrectly correlate the Dow with the entirety of the U.S. stock market,” says Jon Lapp, founder of Haven Financial Advisors in Manheim, Pennsylvania.
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Because the Dow itself is so small, an exchange-traded fund tracking the index is not necessarily appropriate as a core holding in a broadly diversified portfolio, he adds.
Below are seven ETFs that track the Dow index, in some form. Only one, the SPDR Dow Jones Industrial Average ETF Trust (ticker: DIA), directly replicates the 30-stock Dow Jones Industrial Average.
Here’s a look at how they differ and whether they’re suitable for investors seeking a narrowly targeted sliver of the U.S. large-cap market:
— SPDR Dow Jones Industrial Average ETF Trust (DIA)
— First Trust Dow 30 Equal Weight ETF (EDOW)
— Invesco Dow Jones Industrial Average Dividend ETF (DJD)
— ProShares Short Dow30 (DOG)
— ProShares Ultra Dow30 (DDM)
— ProShares UltraShort Dow30 (DXD)
— ProShares UltraPro Short Dow30 (SDOW)
SPDR Dow Jones Industrial Average ETF Trust (DIA)
“Most investors assume the Dow’s 30 stocks are ranked by company size. They are not,” says Doug Greenberg, founder of Pinnacle Wealth Advisory in Austin, Texas.
The index is price-weighted, he notes, so the highest-priced shares have the most sway over performance.
“DIA owns the Dow exactly as it trades, cheaply, at a 0.16% expense ratio and a trailing yield in the low 1.4% range,” Greenberg says.
An ETF that simply tracks the Dow may be suitable for conservative investors or those near retirement who want blue-chip exposure with lower tech concentration than the S&P 500. The Dow’s lineup skews toward mature dividend payers and tends to be less volatile during tech-driven broad-market sell-offs.
For most investors, an S&P 500 fund would be a stronger core holding, as its weightings tend to be more reflective of actual economic scale and even a company’s importance within the overall economy.
First Trust Dow 30 Equal Weight ETF (EDOW)
This ETF addresses the Dow’s price-weighted shortcoming by equal-weighting all 30 components. Its expense ratio of 0.5% is higher than DIA’s. That’s because equal-weight rebalancing is operationally complex, and with $44 billion under management, DIA’s massive scale means it can spread out costs across more assets.
The result of equal weighting is a portfolio that tilts slightly toward smaller-cap Dow names and away from the heavyweights, says Jeff Judge, a managing partner at Chesapeake Financial Planners in Forest Hill, Maryland.
“In a flat or slow-growth market, that can be an advantage,” he says. “In a year when the big names run, it will lag. Worth understanding before you choose.”
Since its inception in 2017, EDOW has underperformed DIA in rolling one-, three- and five-year time frames. It’s also underperforming year to date. In the past nine years, stocks like Goldman Sachs Group Inc. (GS) and other high-priced Dow heavyweights have consistently outperformed, boosting DIA’s returns when compared to EDOW’s equal-weight approach.
Invesco Dow Jones Industrial Average Dividend ETF (DJD)
Instead of weighting stocks by price, this ETF tilts toward the highest-dividend payers among the 30 Dow components.
The fund has delivered a return of about 12.4% annually since inception, though it has trailed the traditional Dow benchmark over longer periods.
Yield-weighting means owning more of the slow-and-steady dividend payers and fewer of the high-growth names.
“DJD is inexpensive at 0.07%, but the dividend screen changes the nature of the portfolio,” says Alex Liberfield, managing partner at Liberfield Capital in Miami.
“Investors are mainly accepting a value and income tilt that may work well in some market environments and lag when lower-yielding growth stocks lead,” he says.
[Read: 7 Best ETFs to Buy Now.]
ProShares Short Dow30 (DOG)
This ETF, whose ticker is a nod toward the investment strategy “Dogs of the Dow,” is a bet against its namesake index. It’s designed to move in the opposite direction of the Dow on a daily basis.
That means it’s not a buy-and-hold investment. At 0.95% in annual fees, it’s pricier than most ETFs, but that shouldn’t be surprising. These funds use derivatives like swaps and futures contracts to achieve inverse exposure, but those methods are pricey to execute.
The ongoing cost of maintaining the short position gets passed along to shareholders, which is why DOG’s 0.95% expense ratio is so much higher than DJD’s 0.07%.
The performance numbers show why this isn’t an ETF to hold for the long term: As large U.S. stocks have rallied in the past 15 years, this ETF has, of course, returned the inverse.
“DOG can have a legitimate short-term hedging role for a sophisticated investor who understands it will drag on a rising market and is not designed to hold for a year,” Judge says. “But most retail investors using it as a bearish bet hold it too long and give back more than they protected.”
ProShares Ultra Dow30 (DDM)
DDM targets twice the daily return of the Dow Jones Industrial Average, making it another short-term trading tool rather than a buy-and-hold investment.
This ETF has an expense ratio of 0.95% annually. Like other leveraged ETFs, it can post solid returns at times, but the catch is that leverage cuts both ways, and losses get doubled too.
“Buying DDM simply because you expect the Dow to rise over several years would be a poor match between the instrument and the thesis,” Liberfield says. “And that’s where a lot of retail gets caught out.”
The distinction between trading and long-term investing matters: DDM is designed to hit its performance target on a daily basis, not over weeks or months. Holding it longer introduces compounding effects that can cause returns to drift significantly from what investors expect, in either direction.
ProShares UltraShort Dow30 (DXD)
DXD is even riskier than DDM, as its strategy is inherently more aggressive. It targets twice the inverse of the Dow’s daily return, so if the Dow drops by 2%, DXD is designed to gain 4%.
But that works both ways: A 2% gain in the Dow means a loss of 4% for this ETF. Hold it for more than a day and the math gets messy, as compounding effects can cause returns to drift unpredictably. In other words, the returns may not be what you expect.
The long-term numbers tell the story. Performance is atrocious, as it’s lost more than 23% annually since its inception in 2006. At 0.95% in fees, investors are paying up for an instrument that demands near-perfect timing to use effectively.
“DDM and DXD are daily-reset instruments,” Judge says. “They do not deliver two times annual returns on the Dow. Compounding decay against a volatile index means the longer you hold them, the further the actual return diverges from what the name implies.”
ProShares UltraPro Short Dow30 (SDOW)
You could call SDOW an extreme bet against the Dow, as it targets three times the inverse of the index’s daily return. When you see a 2% decline in the underlying index, this ETF is intended to post a 6% gain, but don’t forget the flip side: A 2% rally in the Dow means a 6% loss.
Those losses can add up fast, and holding this too long could be devastating. SDOW has declined at a rate of 38% annually since the fund launched in 2010. This is a very specific instrument for experienced traders and speculators, not investors.
Because the fund resets daily, returns over weeks or months can diverge dramatically from three times the Dow’s inverse, due to compounding effects and volatility.
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7 Best Dow Jones ETFs to Buy originally appeared on usnews.com
Update 07/01/26: This story was published at an earlier date and has been updated with new information.
