Many Canadian investors choose to get their U.S. exposure through an S&P 500 ETF for a number of reasons.
First, fees are almost nothing. Since the S&P 500 is such a well-owned index, competition has pushed costs down to virtually zero. That’s good news for investors.
There’s also a great deal of diversification offered by an S&P 500 ETF. It’s a good sampling of the largest U.S. businesses.
But there are also advantages to owning a Dow Jones Industrial Average ETF too. Concentrated holdings can lead to better returns. And it’s a way to get exposure to the same companies with a much different weighting.
The BMO Dow Jones Industrial Average Hedged to CAD (TSX:ZDJ) is somewhat small, with only $118 million in assets. Shares trade at just over $33 each and pay a dividend of 1.8%. It has a management fee of 0.23%, which is a little high versus S&P 500 ETFs, but is still quite reasonable.
Top holdings include Goldman Sachs (8.1% of assets), 3M Company (6.0% of assets), and IBM (5.6% of assets). Remember, the Dow Jones is a price weighted index, so the constituents with the highest stock price have the highest weighting. Market cap means nothing.
Investors who don’t want the Canadian Dollar hedged version of the ETF must look stateside and buy the SPDR Dow Jones Industrial Average ETF (NYSE:DIA), a large and incredibly liquid choice. It offers the same holdings as the Canadian version with a slightly lower management fee of 0.17%.
