Boost for Dow ETFs as index passes 23,000

Oct 19th, 2017 | By | Category: Equities

Investors in ETFs that track the Dow Jones Industrial Average (DJIA) have enjoyed a year of incredibly strong performance and were again celebrating as the index closed over 23,000 for the first time on 18 October 2017. The index, which celebrated its 120-year anniversary in 2016, has risen 30.4% in the 12 months to 18 October compared to the 21.9% returned by the S&P 500 Index over the same time period.

Boost for Dow ETFs as index passes 23,000

Boost for Dow ETFs as index passes 23,000

Jamie Farmer, managing director, index data services, S&P Dow Jones, said: “There have been four 1000-point thresholds crossed in 2017, the most of any year since the DJIA’s inception in 1896. Of course, as the Average gains in value each 1000 points represents a smaller percentage movement. In this case, the move from 22,000 to 23,000 results in a 5.2% return.”

European investors can achieve exposure to the index through the iShares Dow Jones Industrial Average UCITS ETF (LON: CIND) and the Lyxor Dow Jones Industrial Average UCITS ETF (LON: DJEU). CIND has $323 million in assets with a total expense ratio (TER) of 0.33%, while DJEU has $200m in assets with a TER of 0.50%.

The DJIA is made up of 30 of the largest stocks listed in the US. The industrial moniker is largely historical, as constituents today represent many sectors, except transportation and utilities, which are excluded.

While stock selection is not governed by quantitative rules, companies are typically added to the index only if they have an excellent reputation, demonstrate sustained growth and are of interest to a large number of investors. Current constituents include Apple, Microsoft, Nike, Visa, Johnson & Johnson, Intel, McDonald’s and Caterpillar.

The index differs from most modern indices in that it is price-weighted rather than market capitalisation-weighted. The index was the second to be calculated by Charles Dow, the first being the Dow Jones Transportation Average, which preceded the DJIA by two years. Of the original 12 index members, only General Electric is still included today.

Farmer added, “There have been 51 new closing highs achieved year-to-date, the most since 2013 when the DJIA struck a new high 52 times. Prior to that, the most new highs were marked in 1995 (69 new highs).”

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