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How to invest in the Dow Jones
Buy stocks or ETFs that track the 30 largest blue-chip companies in the US.
What is the Dow Jones?
The Dow Jones Industrial Average (DJIA), also known as the Dow, is a stock market index that tracks 30 of the largest blue-chip companies on the New York Stock Exchange and the Nasdaq. The index was founded in 1896, by Charles Dow and Edward Jones, who also created the Dow Jones Transportation Average. It’s a price-weighted index that acts as a barometer for the US economy. The Dow is maintained by S&P Dow Jones Indexes and is the second-oldest US market index, second only to the Dow Jones Transportation Average.
How to invest in the Dow Jones
There are two ways to invest in the Dow Jones: stocks and ETFs.
Purchasing stocks allows you to pick and choose which companies you wish to support. You could buy one share in each of the 30 companies in the Dow or select a few stocks. Stocks offer a targeted investment opportunity and tend to have greater profit potential but have one major downside: limited exposure. Many of the stocks in the Dow are worth hundreds of dollars, so it can be expensive to invest.
If it’s broad market exposure you’re interested in, consider investing in an exchange-traded fund (ETF). ETFs are a less expensive way to gain exposure to the market, as these funds track the entire index. ETFs tend to be more stable than individual stocks but come with fees that typically range from 0.03% to 2.5%.
Before you can swap stocks or ETFs on the Dow, you need a share trading account that has access to US stocks, such as Stake, Hatch or Sharesies.
Here’s a breakdown of the investment process:
- Open a share trading account. Check out your options carefully, making sure you take fees, research tools and investor feedback into account.
- Deposit funds. Once you set up an account, you need to deposit funds before you can start trading.
- Select your securities. Use your platform’s research tools to narrow down stock and ETF options.
- Monitor your investments. Log in to your trading account to track your investments.
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What ETFs track the Dow Jones?
- SPDR Dow Jones Industrial Average ETF (DIA)
- iShares Dow Jones US ETF (IYY)
- ProShares UltraPro Dow30 (UDOW)
- ProShares Ultra Dow30 (DDM)
What stocks are in the Dow Jones?
|American Express||NYSE||NYSE: AXP||Financial services|
|Apple Inc||Nasdaq||AAPL||Information technology|
|Boeing||NYSE||NYSE: BA||Aerospace and arms|
|Caterpillar Inc||NYSE||NYSE: CAT||Construction and mining|
|Chevron Corporation||NYSE||NYSE: CVX||Petroleum industry|
|Cisco Systems||Nasdaq||CSCO||Information technology|
|The Coca-Cola Company||NYSE||NYSE: KO||Food industry|
|Dow Inc||NYSE||NYSE: DOW||Chemical industry|
|ExxonMobil||NYSE||NYSE: XOM||Petroleum industry|
|Goldman Sachs||NYSE||NYSE: GS||Financial services|
|The Home Depot||NYSE||NYSE: HD||Retailing|
|IBM||NYSE||NYSE: IBM||Information technology|
|Johnson & Johnson||NYSE||NYSE: JNJ||Pharmaceuticals|
|JPMorgan Chase||NYSE||NYSE: JPM||Financial services|
|McDonald’s||NYSE||NYSE: MCD||Food industry|
|Merck & Co||NYSE||NYSE: MRK||Pharmaceuticals|
|Procter & Gamble||NYSE||NYSE: PG||Consumer|
|The Travelers Companies||NYSE||NYSE: TRV||Financial services|
|UnitedHealth Group||NYSE||NYSE: UNH||Managed health care|
|United Technologies||NYSE||NYSE: UTX||Conglomerate|
|Visa Inc||NYSE||NYSE: V||Financial services|
|Walgreens Boots Alliance||Nasdaq||WBA||Retailing|
|The Walt Disney Company||NYSE||NYSE: DIS||Broadcasting and entertainment|
Why should I invest in the Dow Jones?
The Dow tracks 30 of the largest and most profitable publicly traded companies in the US. These companies are hugely successful and as a result, tend to offer stable earnings. Individually buying into the Dow’s tracked stocks is expensive, but ETFs offer simplified, broad market exposure with a single purchase. The Dow Jones is designed to act as a barometer for the US economy, so investing in this index allows shareholders to keep a close watch on the market.
What are the risks of investing in the Dow Jones?
No index is foolproof, and no investment is risk-free. The Dow Jones is one of the most reputable indexes on the market, but there are drawbacks to consider before you invest.
Its main drawback is that it’s limited. The 30 companies it tracks are among the most successful on the market — but compare this to the 500 companies tracked by the S&P 500 or the 3,000 companies tracked by the Russell 3000, and the Dow Jones begins to look more restrictive than most.
Financial experts argue that the Dow Jones fails to account for the small- to mid-cap stocks that represent an important aspect of the US economy. One way to combat this shortcoming is to invest in indexes that focus on smaller companies, like the Russell 2000.
How is the Dow Jones performing?
Use the graph below to explore the historical performance of the Dow.
As one of the oldest indexes on the market, the Dow Jones may be a sensible investment option for those looking to invest in well-established blue-chip companies. However, whether the Dow is a prudent choice for your portfolio depends on your risk tolerance and investment goals.
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