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Investing / ETF vs Mutual Fund for buying Dow Jones , RYDEX? Help
Dec 01, 2021
ETF vs Mutual Fund for buying Dow Jones , RYDEX? Help
Should the Dow collapse to prices where value is available due to whatever reason, I would like to buy a Dow Jones index on a monthly basis, i.e $500 a month for 10 years plus or until I feel the Dow has made sufficient gains. The investment must allow any profits to be used to compound the investment. My question is what options do I have to buy the Dow in this way, simply to put in a set amount each month in a pension investment style format and how do I go about it?
Replies (8)
Dec 01, 2021
@Andy3AL, dollar cost averaging is a wise choice. To compound the investment, just make sure you check the option to reinvest dividends. You can manually log into your brokerage account (assuming you are talking about an IRA or Roth IRA and it is held in a brokerage account) and put the fixed amount into the same Dow Jones index fund every month or better yet, set it up automatically so you don't have to worry about it - all you have to worry about is contributing that steady $500 into the account every month!
Dec 02, 2021
@Will368, many thanks. Not an IRA, I am in the UK and wanted to invest via an online broker.
Dec 01, 2021
@Andy3AL, Reinvest proceeds from the fund back into it. Are you looking at a Rydex fund on the Dow Jones index? Curious why you wrote RYDEX there. If that is the case, take also a look at the ETFs that are lower cost and you can reinvest them too. Those Rydex fees look high at over 1.7% and for a simple index fund you can find ETF alternatives like DIA that costs 0.16% and IYY at 0.20%. In full disclosure I'm not an advisor but manage my own investments.
Dec 02, 2021
@Vivian818, thank you. This really helps. I am in the UK and am looking specifically at the Dow Index. I just looked into the DIA you siggested. Low expense ratio, high net assets, this looks perfect for what I wanted. Can i kindly ask if ETFs allow for dividends/profits to be reinvested automatically? Also, I am in the UK, any recommendation of how I go about buying the DIA, i.e Broker Thanks and sorry for my inexperience
Dec 03, 2021
@Andy3AL, happy to help! I can't speak for UK brokers but are there any reputable online brokers there with no fee trades? If so, when you do buy DIA for example there should be an option you can choose to reinvest your dividends. ETF dividends can be reinvested. All I did to make that happen was to check a box to reinvest dividends back into the fund as opposed to having the cash swept into an cash account -- did that all online. I would imagine you should be able to do the same in the UK.
Dec 01, 2021
@Andy3AL, here's a quick comparison of DIA and IYY mentioned already here. Over a long period of time like 10 years, the fees can compound, so if all the fund is doing is tracking an index and nothing more, I'd go for the lowest cost.
You may find this lesson relevant and helpful.
Click on it below and a new tab will open and take you directly to the lesson.
What Are ETFs?
Investing Basics
6 min
Dec 02, 2021
@Jess225, Thank you. Really appreciate the time you invested into your answer and have learnt so much from that.