5 ETFs to Own the Dow as It Hits New Highs

How do you Dow? Let’s count the ways.

Reviewed by: etf.com Staff
Edited by: James Rubin

If the Dow hits an all-time high, does it make a sound? In recent years, not nearly as much as when the S&P 500 does, at least to many investors.  

But the venerable old 30-stock Dow Jones Industrial Average, with its quirky price-weighted allocation system (versus the more popular capitalization-weighted or equal-weighted ETF structures), recently reached its highest level ever. 

The Dow used to be “the market” to nearly every U.S. investor. After all, it started in 1896, about a half-century before the S&P 500 arrived. But with the arrival of the Nasdaq 100 during the past couple of decades, the Dow essentially lost a lot of its former glory.  

Today, the Dow is still the main index we’re likely to hear quoted by national TV newscasters and political candidates. That probably has a lot to do with the age 60+ crowd who remembers when the Dow was “it.” Those happen to be the bigger donors and politically active types.  

The Dow is a 30-stock index, and investors can buy into a popular ETF that seeks to replicate it in its traditional, price-weighted form via the SPDR Dow Jones Industrial Average ETF Tr (DIA), a $33 billion ETF that has long been the “go-to” for financial advisors and investors wanting to track the Dow. 

The Dow: Have It Your Way 

But more recently, thanks to ever-present innovation in the ETF industry, there are more ways to access the Dow index than just DIA. Those include a pair of ETFs that have asset bases of under $300 million that might fly under many investor radars. The First Trust Dow 30 Equal Weight ETF (EDOW) owns the same 30 stocks that DIA does, but weights them in a more familiar fashion, equally. And the Invesco Dow Jones Industrial Average Dividend ETF (DJD) weights 28 Dow stocks by their dividend yields. Why doesn’t it include the other two stocks? They don’t pay dividends. 

More recently, ETF industry leader Global X launched a pair of covered call ETFs that track the Dow but use call options to cut some risk and add some income. The Global X Dow 30 Covered call ETF (DJIA) and the Global X Dow Covered Call & Growth ETF (DYLG) cover 100% and 50% of a traditional price-weighted 30-stock Dow portfolio.  

Which Dow ETF Performs Best? 

DJIA didn’t come to market until 2022, followed by DYLG in 2023. But when reviewing the performance of the other three ETFs since their common inception date of August 2017, the original DIA has been the best producer, with a 97% gain to EDOW’s 87% and DJD’s 84%. So much for that oddball price-weighted allocation approach! It has worked the best over the past six years or so. 

Still, past performance only guarantees one thing: unless one was invested in the ETF during that past period, they can’t have that performance. Furthermore, any one snapshot period can be misleading. It is worth noting that the biggest recent stress test for all equity ETFs was the sustained down year for U.S. equities in 2022. But as it turns out, this was the Dow’s time to shine in many forms. DJD fell less than 1%, while DIA and EDOW dropped just 7%, a fraction of the losses in the S&P 500 and Nasdaq 100 indexes that year. 

How Now, Old Dow? 

I’ll admit to two things: being old enough to remember when the Dow was  “the market,” and believing it is still the best-constructed major U.S. large cap stock index around. The S&P 500 and Nasdaq 100 are not only top-heavy in FAANG stocks based on their outstanding past performance, but they also now look too much alike as a result. The Dow has been a relatively moderate approach to investing in U.S. mega cap stocks, and with five different ways to access that 128-year-old market measure, ETF investors can, shall we say, Dow as they wish. 

Rob Isbitts was an investment advisor for 27 years before selling his practice to focus on ETF research and education. He is based in Weston, Florida. Contact him at  [email protected] and follow him on LinkedIn.