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The Dow Jones Industrial Average (DJIA) is the granddaddy of all stock indexes. Often called the Dow, this index began in 1896 and is considered the primary indicator of the health of Wall Street and the broader financial market. It is made up of only 30 stocks, but they are considered to be the best blue chip stocks in the United States.
In 2017, the Dow Jones Industrial Average reported a total return of 28.08% through December 21, 2017. The outlook for 2018 continues to be bullish with markets stabilizing and catalysts such as U.S. tax reform helping to fuel continued corporate earnings growth.
Investors seeking to profit from a bullish perspective on the Dow can invest in the index without buying all 30 stocks by buying exchange-traded funds (ETFs) that track the Dow to diversify their exposure. We have chosen four ETFs that attempt to mimic or beat the Dow’s performance.
These ETFs were selected based on their investment strategy and 2017 returns. All figures listed are as of December 21, 2017.
SPDR Dow Jones Industrial Average ETF (DIA)
The SPDR Dow Jones Industrial Average ETF is a reliable ETF for replicating the performance of the Dow. It was launched in 1998 and has a history of tracking the index accurately. This ETF invests in all the stocks of the Dow, and weights them similar to the underlying index. Expenses for the ETF are low at 0.17% allowing for minimal tracking error.
As of December 21, 2017, DIA was trading at $248.12 with a year-to-date (YTD) return of 27.92%. The ETF’s three-year annualized total return was 14.27%. While equities are considered to be volatile, blue chip Dow stocks are often looked to as a reliable investment and this ETF can be a good way to accumulate capital gains over the long term.
- Price: $248.25
- Avg. Volume: 745,905
- Net Assets: $22.2 billion
- Yield 1.95%
- YTD Return 27.92%
- Expense Ratio: 0.17%
ProShares Ultra Dow30 (DDM)
Investors bullish on the returns of the Dow have two leveraged options from ProShares. The Ultra Dow30 is a leveraged ETF that seeks to replicate two times the daily performance of the DJIA. The fund invests in a number of securities to achieve its objective. Investments include equity securities from the index, derivatives including SWAP agreements and futures contracts, and money market instruments for short-term cash management.
As of December 21, 2017, DDM was trading at $133.22 with a YTD return of 59.28%. The ETF’s three-year annualized total return was 26.67%.
- Price: $133.22
- Avg. Volume: 39,072
- Net Assets: $456.9 million
- Yield: 0.68%
- YTD Return: 59.28%
- Expense Ratio 0.95%
ProShares UltraPro Dow30 (UDOW)
The ProShares UltraPro Dow30 is another leveraged option for investors bullish on the return prospects of the Dow. This fund uses leverage to replicate three times the daily performance of the DJIA. ProShares Dow30 leveraged ETFs use equity securities from the index, derivatives including SWAP agreements and futures contracts, and money market instruments for short-term cash management to achieve the enhanced performance objective.
As of December 21, 2017, UDOW was trading at $95.46 with a YTD return of 98.90%. The ETFs three-year annualized return was 39.04%.
- Price: $95.46
- Avg. Volume: 217,032
- Net Assets: $458.6 million
- Yield: 0.04%
- YTD Return: 98.90%
- Expense Ratio: 0.95%
ELEMENTS Dogs of the Dow (DOD)
The ELEMENTS Dogs of the Dow Linked to the Dow Jones High Yield Select 10 Total Return Index is another exchange traded option for investors seeking to gain from appreciation in Dow 30 stocks. Instead of investing in all 30 index components, this fund invests according to the popular Dogs of the Dow strategy which centers on the top dividend paying stocks in the DJIA for each year. It is reconstituted annually to include the ten highest dividend paying stocks in the index. Thus its returns rely on the top blue chip dividend payers for the year.
There are numerous funds in the market that seek to follow a Dogs of the Dow strategy. The ELEMENTS fund is complex in its construction. It is structured as an exchange-traded note (ETN) and doesn’t payout the dividends but rather reinvestments them in the fund.
As of December 21, the ETN was trading at $23.43 with a YTD return of 25.28%. The three-year annualized total return of the fund was 14.30%.
- Price: $23.43
- Avg. Volume: 1,583
- Net Assets: $37.1 million
- Yield: N/A
- YTD Return: 25.28%
- Expense Ratio: 0.75%