Make Money in All the Dow Stocks the Easy Way

Before you go, we thought you'd like these...
Before you go close icon

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the 30 stocks in the Dow, which represent some of our nation's biggest and most vital companies, to thrive over the long term, the SPDR Dow Jones Industrial Average ETF (NYS: DIA) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Dow ETF's expense ratio -- its annual fee -- is a very low 0.18%. (Dividend seekers will like its yield of roughly 2.7%.)

This ETF has performed reasonably well, beating the broader S&P 500 over the past three, five, and 10 years, on average. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 0%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do. It only has to change its holdings when the 30 components of the Dow are rejiggered, which typically happens every few years.

What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Caterpillar (NYS: CAT) , up 4%, has strong prospects due to its expansion plans in China and its partnership with Navistar (NYS: NAV) . Intel (NAS: INTC) , up a strong 26%, apparently doesn't have much to fear from rival Advanced Micro Devices (NYS: AMD) new "Bulldozer" chips.

Other companies didn't add as much to the ETF's returns last year, but could have an effect in the years to come. Boeing (NYS: BA) shed 10%, with investors bummed that its long-awaited Dreamliner will lead to losses in its early years, and that the company's deals with American Airlines parent AMR may end up regretted, as AMR hovers near bankruptcy.

3M (NYS: MMM) fell about 13%, and some see the company as having lost its way, spending less on R&D, supplying other companies when it should be leading them, and not sufficiently living up to its longtime reputation as an innovation giant.

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

Learn aboutthe best dividend ETFs. And if you're looking for some great investments beyond ETFs, consider these10 Stocks for Your Retirement Portfolio.

At the time this article was published LongtimeFool contributor Selena Maranjianowns shares of 3M and Intel, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Intel.Motley Fool newsletter serviceshave recommended buying shares of 3M and Intel.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Intel. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners