DIA Is At A Record. Should You Touch It

DIA Is At A Record. Should You Touch It?

A new high can make investors antsy, but a look inside this fund suggests patience is the wisest course.

After a +15.7% climb over the past three months, your holding in the State Street SPDR Dow Jones Industrial Average ETF Trust (DIA) just closed at $522.39, a new record high. This is an exchange-traded fund designed to give you a slice of 30 of America's largest, most established companies. When a position hits a new peak, the temptation to do something, sell, trim, take profits, is powerful. But a new high, by itself, is not a sell signal. The real question is about the quality of that high.

How Broad Is This Rally, Really?

To decide what to do, you have to look under the hood. The first thing to check is whether this is a healthy, broad-based advance or a narrow run driven by a few hot names. Here, the evidence points toward health. Over the past three months, 23 of the 30 largest holdings rose. The fund's major holdings also span 9 sectors, giving it a diversified foundation. This isn't a concentrated bet on one corner of the economy.

Next is valuation. Is this high a sign of a speculative bubble? The fund holdings trade at about 23.9 times earnings. That's only slightly above its roughly 5-year median of 22.9, suggesting the price is fair relative to its own recent history. While the fund is a bit stretched, sitting about 8.4% above its 200-day moving average, it doesn't scream overbought. Of course, no investment is without risk. It's worth remembering that the fund's deepest fall from a high to a later low was 20.8%, a reminder of the kind of downturn a long-term holder must be prepared to weather.

So, What Is The Smartest Move?

Given the evidence, the most sensible action is likely the hardest one: do nothing. This is what compounding looks like. A diversified, fairly valued fund hitting new highs on the back of a broad advance is not a warning sign; it's a sign your investment is working as intended. Selling an asset like this just because it's performing well is one of the classic ways investors leave money on the table. The only strong reason to act is if this run has pushed your DIA allocation well past its intended target in your overall plan; trimming back to your original weight is just prudent portfolio management.

A new high feels like an event that demands a reaction. But the data here, broad participation, fair valuation, points to a different conclusion. This isn't a speculative peak to be timed. It's a diversified portfolio doing its job. Unless the facts on the ground change, the most productive move may be to simply let it continue.

So, Is There A Better ETF For Your Money?

Whether you are inclined to keep holding or tempted to take the gain and look elsewhere, the same question follows: is there simply a better ETF to own right now? A new high tells you the price is up, not whether DIA still stacks up against its peers on valuation, return, and risk.

Our ETF Valuation and Performance Scorecard ranks the major ETFs side by side on exactly those measures, so you can see at a glance whether DIA is still near the top of the pack or whether your money could work harder somewhere else.

What's An Alternative Approach To An ETF?

And if that question has you wondering whether picking a single ETF is even the right approach, there is another way to think about it. An index fund simply holds whatever its benchmark dictates and never trims a winner for you, so the take-profit decision is always left to you, usually at the least comfortable moment.

Our High Quality (HQ) Portfolio takes the opposite approach: rule-based, multi-factor selection across different kinds of businesses, re-balanced on a schedule, so winners get trimmed and the mix stays deliberate instead of drifting into a few names. It has a record of outpacing a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000.