Concentrated Exposure to Industry Leaders
This Dow Jones Industrial Average tracker has an odd weighting scheme that limits its appeal.
SPDR Dow Jones Industrial Average ETF (DIA) invests in 30 industry-leading companies that approximate the industry composition of the U.S. stock market. However, it leaves out a broad swath of the U.S. large-cap market and weights its holdings by their share price, which is arbitrary and leads to considerable concentration.
Since its inception in 1896, the Dow Jones Industrial Average has served as a barometer of the U.S. stock market by tracking a select group of the country's industrial leaders. Unlike most indexes, the Dow weights its constituents by their share price, rather than by market capitalization. So, even though Exxon Mobil (XOM) has a larger market cap than Goldman Sachs (GS), it receives a lower weighting in the portfolio because Goldman Sachs has a higher share price.
Alex Bryan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.