Should DIA Be a Core Holding in a Diversified Portfolio?

In the ever-evolving landscape of exchange-traded funds (ETFs), investors seeking long-term growth and stability face a critical question: Can the SPDR Dow Jones Industrial Average ETF Trust (DIA) serve as a core holding in a diversified portfolio? To answer this, we must weigh DIA's performance, cost, sector concentration, and risk profile against broader-market alternatives like the SPDR S&P 500 ETF Trust (SPY), the Schwab U.S. Dividend Equity ETF (SCHD), and the Vanguard Value ETF (VTV).

Performance and Cost: A Mixed Bag

DIA has delivered a 3-year annualized return of 15.42% as of December 2025, trailing behind SPY's 20.44% but outperforming SCHD's 5.43% and VTV's 13.70% according to SSGA data. While DIA's returns are robust, its 0.16% expense ratio lags behind SPY's 0.0945%, SCHD's 0.06%, and VTV's 0.04% according to SSGA data. For investors prioritizing cost efficiency, DIA's higher fees may erode long-term gains, particularly when compared to the ultra-low-cost VTV. However, DIA's performance suggests it remains competitive in a market where large-cap growth stocks have dominated.

Sector Concentration: A Double-Edged Sword

DIA's portfolio is heavily tilted toward finance (26.52%), technology services (14.65%), and electronic technology (12.71%) according to SSGA data. This concentration reflects the Dow Jones Industrial Average's historical focus on industrials and financials, with limited exposure to the tech giants that have driven recent market gains. In contrast, SPY offers broad exposure to all 11 GICS sectors, with 99.01% of its holdings in large-cap stocks according to Lazy Portfolio ETF analysis. SCHD and VTV, meanwhile, emphasize value and income, with SCHD's top sectors-energy, consumer staples, and healthcare-each accounting for ~19% of assets according to The Fool's coverage, and VTV's allocations skewed toward healthcare (21.28%) and financial services (20.17%) according to Mutual Funds data.

DIA's sector concentration can amplify returns in bullish cycles for finance and industrials but exposes investors to underperformance during tech-led rallies. For instance, SPY's broader diversification likely contributed to its superior 3-year returns, as it captures gains from both growth and value stocks. Investors seeking thematic exposure to specific sectors may find DIA appealing, but its narrow focus challenges its role as a core holding in a diversified portfolio.

Risk Profile: Volatility and Drawdowns

Risk metrics further complicate DIA's case. Its 3-year standard deviation of 16.54% exceeds SPY's 15.18% and SCHD's 12.83%, though it aligns with VTV's 15.25% according to SSGA data. While DIA's volatility is moderate by historical standards, its maximum drawdowns and beta (implied to be higher than SPY's) suggest greater sensitivity to market swings. In contrast, SCHD's beta of 0.68 and VTV's 15.25% standard deviation highlight their lower volatility, making them attractive for risk-averse investors according to The Fool's coverage.

The Case for and Against DIA as a Core Holding

DIA's strengths lie in its liquidity, brand recognition, and exposure to blue-chip industrials and financials. Its performance has kept pace with the broader market in recent years, and its low expense ratio (relative to other sector-specific ETFs) remains competitive. However, its narrow sector focus, higher volatility compared to SPY, and underperformance relative to the S&P 500's broader diversification weaken its case as a core holding.

For investors seeking a true market benchmark, SPY's lower cost and broader exposure make it a superior choice. SCHD and VTV, meanwhile, cater to niche strategies-dividend income and value investing-that may complement a diversified portfolio but do not replicate the market's full breadth.

Conclusion: A Satellite, Not a Core

DIA's role in a long-term portfolio hinges on an investor's risk tolerance and strategic goals. While it can serve as a satellite holding for those seeking exposure to industrials, financials, or the Dow's legacy components, its limitations in diversification and cost make it a less compelling core asset than SPY. In a world where market dynamics increasingly favor broad-based, low-cost index funds, DIA's niche appeal is best balanced with complementary ETFs that address its sector and volatility shortcomings.