Selecting the Best Index Funds for Your Portfolio: IVV vs DIA

When building a diversified investment portfolio, choosing among the best index funds requires careful consideration of multiple factors. Two of the most prominent options—the iShares Core S&P 500 ETF (IVV) and the SPDR Dow Jones Industrial Average ETF Trust (DIA)—offer distinctly different approaches to gaining exposure to the U.S. equity market. While both are excellent index funds, they serve different investor needs and come with different risk-return profiles.

IVV tracks the S&P 500, capturing approximately 500 of the largest U.S. companies across diverse sectors. DIA, by contrast, focuses on just 30 blue-chip stocks from the Dow Jones Industrial Average. This fundamental difference shapes everything from cost structure to portfolio volatility and dividend payouts. Understanding these distinctions helps investors determine which best index fund aligns with their goals.

The Cost Advantage and Fee Structure

Cost remains one of the most critical factors when comparing index funds. IVV operates with an expense ratio of just 0.03%, making it exceptionally cheap for investors. DIA, meanwhile, charges 0.16% annually—more than five times higher than IVV. For someone investing $100,000, this translates to a $30 annual cost for IVV versus $160 for DIA over a one-year period.

Despite the higher fee, DIA compensates with a dividend yield of 1.4%, compared to IVV’s 1.05%. For income-focused investors, this additional yield may offset the higher expense ratio. However, for growth-oriented investors, IVV’s lower cost structure is a significant advantage, particularly over long investment horizons where fee drag accumulates substantially.

IVV also dwarfs DIA in assets under management, holding $763 billion compared to DIA’s $44.1 billion. This size advantage translates to better liquidity and tighter bid-ask spreads for traders.

Performance and Risk Profile

Over the trailing 12 months as of early 2026, IVV delivered a 15.4% total return, outpacing DIA’s 13% return. This performance gap extends over longer time horizons as well. When examining a five-year period, a $1,000 investment in IVV would have grown to approximately $1,814, while the same amount in DIA would have reached only $1,582.

The risk profiles tell an equally important story. DIA’s maximum drawdown over the past five years reached -43.43%, nearly double IVV’s -27.67% decline during the same period. This dramatic difference reflects DIA’s concentrated portfolio structure—with only 30 holdings, any major move in a single company significantly impacts the entire fund’s value. IVV’s broader composition of 500 companies provides natural downside protection.

Volatility metrics further support IVV’s stability. DIA’s beta of 0.89 might seem to suggest lower volatility than the S&P 500, but this metric can be misleading due to its concentrated nature and specific sector weightings.

Understanding Portfolio Composition

DIA’s 30-stock portfolio emphasizes financial services (27.5%), technology (18.9%), and industrials (15.8%). The fund’s largest positions include Goldman Sachs Group at 11.61%, Caterpillar at 7.92%, and Microsoft at 5.86%. These concentrated holdings mean that investor outcomes hinge heavily on the performance of a relatively small number of mega-cap companies.

IVV’s S&P 500 exposure creates a fundamentally different composition. The fund tilts toward technology (33.65%), financial services (12.8%), communication (10.67%), and consumer cyclicals (10.5%). Top holdings include Nvidia, Apple, and Microsoft, though each represents a much smaller percentage of the overall portfolio. This diversified structure means that no single company can dramatically swing the fund’s performance.

The broader market representation in IVV makes it a true reflection of the overall U.S. economy, whereas DIA essentially tracks 30 large industrial and financial firms that may not represent broader economic trends.

Matching Funds to Investor Types

For Income-Focused Investors: DIA’s slightly higher yield (1.4%) and established blue-chip holdings appeal to those prioritizing regular dividend payments. These 30 companies have long track records of stable dividend distributions, making DIA a dependable source of portfolio income.

For Growth and Diversification: IVV emerges as the superior choice. Its lower expense ratio, stronger five-year performance, and exposure to 500 companies rather than 30 provides meaningful diversification benefits. The broader technology exposure also captures growth sectors that drive long-term wealth creation.

For Long-Term, Buy-and-Hold Investors: IVV functions as a benchmark portfolio holding. The S&P 500 serves as the barometer of U.S. stock market health and economic performance, making IVV the gold standard for foundational U.S. equity exposure over decades.

For Conservative Investors Concerned with Volatility: While IVV’s lower maximum drawdown (-27.67% vs -43.43%) might initially favor IVV, investors seeking stability should recognize that both funds track equity markets and carry stock market risk. Neither replaces bonds or other defensive holdings in a balanced portfolio.

Key Financial Metrics at a Glance

Essential Index Fund Terminology

Exchange-Traded Fund (ETF): An investment fund holding a diversified basket of securities that trades on a stock exchange like individual shares, combining the benefits of mutual funds with stock trading flexibility.

Expense Ratio: The annual percentage cost of operating a fund, deducted from investor returns. Lower ratios preserve more of your investment gains over time.

Dividend Yield: The annual dividend income generated by a fund’s holdings, expressed as a percentage of the fund’s current share price.

Beta: A volatility measurement comparing an investment’s price movements to a benchmark index (typically the S&P 500). A beta of 1.0 means the investment moves in line with the market; above 1.0 indicates greater volatility, below 1.0 suggests lower volatility.

Assets Under Management (AUM): The total market value of all securities held within a fund, indicating the fund’s size and liquidity profile.

Blue-Chip Stocks: Shares of large, financially sound companies with long histories of stable earnings, dividend payments, and market leadership within their industries.

Price-Weighted Index: An index like the Dow Jones where companies with higher stock prices exert greater influence on index movements, creating concentration risk.

Maximum Drawdown: The largest percentage decline in fund value from its peak to trough during a specified period, measuring worst-case historical losses.

Final Considerations for Investors

Selecting among the best index funds ultimately depends on your personal investment objectives, time horizon, and risk tolerance. IVV stands out for cost-conscious investors prioritizing diversification and long-term growth, offering broader market exposure through nearly 500 holdings at minimal expense. DIA appeals to income-focused investors who value the stability of 30 established blue-chip corporations and their consistent dividend histories.

Neither fund is inherently “better”—the superior choice depends on whether your priority is capturing comprehensive market exposure through best index fund strategies or concentrating on economically significant household-name companies. For most long-term investors building core portfolio holdings, IVV’s lower costs, superior diversification, and stronger historical performance make it the more compelling selection among these two leading index funds.