Another caveat: The Dow is a focused index of 30 stocks, and a price-weighted one, whereas the S&P 500 provides much more diversified exposure to 500 stocks, and that includes all 30 Dow stocks. Focused stock funds once had their heyday, but that was in the era when actively managed funds ruled and brand-name stock pickers could sell their proprietary "best stock picks" funds through the big brokerage houses.
"The DJIA is a less-appealing index investment than the S&P 500, because it only owns 30 stocks, so it is less well diversified than the S&P 500, and it weights its holdings by share price rather than market capitalization. There is no good economic rationale for doing that," said Morningstar analyst Alex Bryan.
The Dow's price-weighting approach leads to further concentration: The top 10 holdings represent more than half of the portfolio and it prevents any Dow index funds from holding a few names with high share prices, like Alphabet, which would represent more than 20 percent of the portfolio if it were included. Meanwhile, Apple, the most valuable company in the world, is only the sixth- largest holding in the Dow. And Boeing, currently the top holding, has had excellent performance this year that has helped the Dow marginally outperform the S&P 500.
Bryan said the best argument for investing in the DJIA is that it offers exposure to highly profitable industry leaders with durable competitive advantages. But there are also more direct ways of getting that exposure through a quality or dividend growth ETF, such as the iShares Edge MSCI USA Quality Factor ETF (QUAL) or the Vanguard Dividend Appreciation Index ETF (VIG).
The recent run for the Dow should not mislead investors into thinking it's a viable alternative to the S&P 500 as a core stock market holding, said Neena Mishra, CFA and director of ETF research at Zacks Investment Research.
"Share price weighting is arbitrary and antiquated. The index is just a relic from the times when computing other types of weightings was not easy. ... Dow ETFs did particularly well after the election due to their higher exposure to industrials and financials and that brought them back in focus this year, but S&P 500 ETFs will always remain more popular with investors."
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Drew Voros, editor in chief of ETF.com, said the Dow has always been the headline index, right or wrong, but added that "Back in the day, people didn't invest in indexes, so what is the appropriate index to invest one is a relatively new kind of mainstream thought."
Mitch Goldberg, president of investment advisory firm ClientFirst Strategy, said the Dow Jones Industrial Average has an identity problem. "It's not a true industrial indicator like the S&P 500 Select Sector Industrial ETF (XLI). What it has going for it is a compilation of great companies. But Disney, JNJ and AAPL aren't exactly smokestack companies," he said.
"The Dow is a heritage benchmark that depicts the industrial fabric of America, which back in its origination meant a large allocation to railroads and electric companies. Now, the U.S. industrial imprint on the global economy is more service-based, and that is reflected with well-established technology, home retail, and financial service firms," Matthew Bartolini, Head of SPDR Americas Research, explained via email.
Dave Nadig, CEO of ETF.com, said the Dow was never designed to be investable and, for the most part, investors have complied. "Culturally, we pay attention to all sorts of things that have little actual impact: the British monarchy, 'America's Got Talent', Civil War re-enactments. The Dow fits in the same camp — it mostly reminds us of where we've come from."
As far as the future of investing, Nadig's comment implies the question isn't why the S&P 500 has won the war of the index era, but maybe, Why anyone would invest in a Dow-benchmarked fund at all?
"A lot of this, almost all of it, is marketing. I'm not sure if investors are missing anything. It's still a large-cap asset class like S&P. If I never saw it quoted again, I'd be just fine," Goldberg said.
But don't count on that. Morningstar's Bryan has a theory why the Dow still retains some allure as an investment.
"If I had to speculate, I would guess it's because the DJIA gets a lot of press," Bryan said.
Story updated with Dow closing price above 22,000 on Wednesday.