DIA ETF vs SPY ETF — Which is better?

$SPDR Dow Jones Industrial Average Trust(DIA.US)$ than $SPDR S&P 500 ETF(SPY.US)$ Watch more

The Dow Jones Industrial Average outperformed the S&P 500 this year, which is an extremely unusual phenomenon. The DIA ETF tracks the Dow Jones Index, while the SPY ETF tracks the S&P 500.

DIA has declined by only 5.7% so far this year, while SPY has declined 14.8% so far this year. The QQQ ETF, which tracks the Nasdaq 100 index, was even worse, falling 27%.

The main reason is that the Federal Reserve raised interest rates sharply this year, which seriously affected growth stocks, especially large technology stocks. The composition of DIA ETF is mainly value companies. Compared with SPY, SPY's dividends are very high, and SPY's technology stock component is very large.

DIA owns only 30 companies, of which the top 10 include UnitedHealth Group, Goldman Sachs, Home Depot, Amgen, McDonald's, Microsoft, Caterpillar, Honeywell, Visa, and Travelers Company.

The total weight of the top 10 holdings is 56%

The top 10 SPY ETF holdings include Apple, Microsoft, Amazon, Alphabet A and C, Berkshire Hathaway, United Health Group, Tesla, Johnson & Johnson, and ExxonMobil.

The total weight of the top 10 holdings is 25%

DIA's fee rate is 0.16%, while SPY is 0.09%.

DIA's dividend ratio is 1.85%, while SPY is 1.56%. Both ETFs are managed by State Street Global, and dividends are paid quarterly. The next ex-dividend date is December 16.

The Dow Jones Index is calculated by adding the prices of 30 stocks and then dividing by a factor that takes into account changes such as stock splits. This means that companies with higher share prices have more influence on the index's movements, regardless of their total market capitalization. The S&P 500 index is weighted above the limit.

The stock with the biggest increase in the Dow Jones index this year was Chevron, which surged 54% in oil prices. Other biggest contributors are Amgen and UnitedHealth Group, which have a greater impact on the Dow Jones Index. Companies such as Amazon are also not included in the Dow Jones Index, which fell 44% in 2022.

The 30 Dow Jones constituents are also all in the S&P 500 index. The Dow Jones Index has more weight on healthcare, financial, and industrial stocks that have performed well this year.

If interest rates stay higher for a longer period of time, value stocks will beat growth stocks.

I am optimistic about the DIA ETF and think it will continue to outperform SPY until 2023 due to rising interest rates. However, the SPY ETF is more diverse than the DIA ETF, holds 500 shares, and guarantees a place in my portfolio.