to increase risk tolerance with Dow heavyweights.
Large-cap stocks provide long-term investors with fundamentally healthy companies that make their money work for them long-term without the hassle of constantly monitoring SEC registrations, earnings and technical charts. These stocks are typically industry and industry leaders and represent established companies with a market capitalization of $ 10 billion or more.
Two common features of large caps that maximize many of them to avoid high risk in the long run: less volatility during rugged markets and robust dividends. Several indices and benchmarks track large companies, including the (DJI) (also known as the Dow 30) and the (also known as the S&P).
For those seeking exposure to the wide range of large-cap stocks within the Dow, SPDR Dow Jones Industrial Average ETF (NYSE 🙂 is worth considering.
Why Invest In DIA?
As the oldest continuous barometer of the US stock market – created by Charles Dow in 1896 – the Dow Jones Industrial Average is probably the most widely tracked stock market index in the world. The SPDR Dow Jones Industrial Average ETF Trust serves as a proxy for the performance and return of the DJIA, which consists of 30 & # 39; & # 39; blue-chip & # 39; & # 39; US stocks listed on the and the.
A blue-chip company is a large-cap market leader with a strong brand and often a long track record of profit and growth in cash flow. Even when stocks are put under economic pressure, blue chip companies are considered to be relatively safe and reliable investments, as they normally pay dividends, have broad resources to invest in new technology, and can take advantage of economies of scale due to their size.
The DJI is a price-weighted index, so higher-priced stocks have a greater impact on the value of the DJI than those with a lower price. The 30 companies listed on the DJI may shift as stock prices change. For example, if a company has a stock split, it will affect the weighting in the Dow, but not the total market value of the stock itself.
On the other hand, the S&P 500 is cap-weighted, which means that the S&P companies with the largest market capitalizations have the highest weights in the index.
The top ten of DIA comprise approximately 57% of the fund. DJIA's top five companies are Apple (NASDAQ :), UnitedHealth (NYSE :), Home Depot (NYSE :), Goldman Sachs (NYSE 🙂 and Microsoft (NASDAQ 🙂 .
DIA & # 39; s current status
Current price: $ 263.93
52-week range: $ 182.10- $ 295.87
Dividend yield: 2.25%
Expense Ratio: 0.16% per year, or $ 16 on an investment of $ 10,000.
DIA started around $ 285 this year, reaching a record high of $ 295.87 on February 12. In the second half of February and March, investors began to exit risky assets and the shares sold quickly. On March 23, DIA bottomed out at 52 weeks at $ 182.10.
Since then, the comeback for the ETF has been remarkable. On July 28, it closed at $ 263.93. That means a return of about 45% in about four months.
In fact, in the second quarter of 2020, the Dow Jones Industrial Average and the DIA ETF that followed it produced the best quarterly return, about 17%, since the first quarter of 1997 when it was over 21% had won.
We are in the middle of a busy and possibly mercurial profit season. With many stock prices rising recently, short-term and earnings are likely to take place in broader markets and the DIA in the coming weeks, which could be a better entry point for long-term investors.
ETFs have grown in popularity in recent years. In particular, the DIA ETF's value proposition is clear as it follows some of the leading public companies in the US. This makes it a potential cornerstone portfolio for many long-term shareholders.
Other potential large-cap ETFs to invest in may be the Invesco Dow Jones Industrial Average Dividend ETF (NYSE 🙂 . or Schwab US Large-Cap ETF ™ (NYSE :). We plan to cover these funds in the coming months.