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4 Ways to Play Dow Jones With ETFs

Sweta Killa

Wall Street is hitting new highs lately and the Dow Jones Industrial Average broke the new milestone of 28,000 for the first time in history. This marks the 11th record close of 2019 and its first 1,000-point milestone since Jul 11. The dual tailwinds of renewed trade optimism and stronger-than-expected corporate earnings are driving the stock market in recent weeks.

Additionally, the Fed slashed interest rates once again by 25 basis points last month, representing the third rate cut for the year. Lower interest rates have made borrowings cheaper, providing a boost to both investment in new projects and repayment of a higher-rate debt (read: Top-Ranked ETFs That Crushed the Market in a Month).

A spate of better-than-expected data added to the strength. This is especially true as October retail sales have rebounded from a sluggish September and American consumers continue to be willing to spend, which is good news for domestic economic growth.

Given this, we have highlighted some ETFs that could be compelling choices for investors seeking to ride the bull run in the Dow.

SPDR Dow Jones Industrial Average ETF DIA

The ETF tracks the performance of the Dow Jones Industrial Average. It holds 30 stocks in its basket with the highest allocation going to Boeing BA while other securities hold less than 6.4% share. The fund is widely spread across sectors with industrials, information technology, financials, consumer discretionary and healthcare holding a double-digit allocation each. DIA is one of the largest and most-popular ETFs in the large-cap space with AUM of $23.2 billion and average daily volume of 3 million shares. It charges 17 bps in fees per year from investors and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Market-Beating Sector ETFs Year to Date).

iShares Dow Jones U.S. ETF IYY

This fund follows the Dow Jones U.S. Index, holding a broad basket of 1,175 stocks with none accounting for more than 3.9% of assets. Information technology, financials and health care are the top three sectors accounting for double-digit exposure each. The ETF charges 20 bps in annual fees and trades in moderate volume of about 24,000 shares a day. It has amassed $1.2 billion in its asset base and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.    

ProShares Ultra Dow30 ETF DDM

This ETF is a leveraged play that provides twice (2x or 200%) the return of the Dow Jones Industrial Average. It has AUM of $359.7 million and trades in good volume of more than 441,000 shares on average. The product charges 95 bps in annual fees.

ProShares UltraPro Dow30 UDOW

This product also tracks the Dow Jones Industrial Average but offers three times exposure to the index. It has amassed $436 million in its asset base and trades in a solid average daily volume of more than 697,000 shares. Expense ratio comes in at 0.95% (read: Wall Street Hits Record High: Leveraged ETFs to Play).

Investors should note that though DDM and UDOW could lead to huge gains in a very short time frame when compared to traditional funds, these run the risk of huge losses in a fluctuating or erratic market.

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The Boeing Company (BA) : Free Stock Analysis Report
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
Proshares Ultra Dow30 (DDM): ETF Research Reports
 
ProShares UltraPro Dow30 (UDOW): ETF Research Reports
 
iShares Dow Jones U.S. ETF (IYY): ETF Research Reports
 
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