Best Low-Cost Index Funds: Choosing Between IVV and DIA for Your Portfolio

When selecting the best index funds for core U.S. equity exposure, two names frequently emerge: the iShares Core S&P 500 ETF (IVV) and the SPDR Dow Jones Industrial Average ETF Trust (DIA). Both are excellent options, but they diverge significantly in their approach to low-cost investing, portfolio composition, and diversification strategy. Understanding their differences is essential for investors seeking the best mix of affordability and performance.

IVV targets the full S&P 500 index, capturing exposure to 500 large-cap U.S. companies across multiple sectors. DIA, by contrast, tracks the Dow Jones Industrial Average, holding just 30 of the largest, most-established blue-chip companies. This fundamental difference creates distinct trade-offs between comprehensive market coverage and concentrated exposure to industry leaders.

Cost Structure: Why Low-Cost Options Matter More Than You Think

The expense ratio—the annual cost to hold an ETF—reveals a stark contrast. IVV charges just 0.03% annually, making it one of the lowest-cost index funds available. DIA’s expense ratio of 0.16% is higher, but still competitive in the ETF landscape. For a $10,000 investment, this difference translates to $1 per year for IVV versus $16 for DIA.

Over decades, this cost differential compounds significantly. If both funds achieved identical 10% annual returns over 20 years, the fee difference alone could cost DIA investors thousands in foregone gains. For retirement portfolios or long-term wealth building, seeking the best low-cost index funds like IVV can meaningfully enhance final outcomes. Investors focused on minimizing expenses clearly favor IVV’s structure.

However, DIA compensates somewhat with a higher dividend yield of 1.4%, compared to IVV’s 1.05%. For income-focused investors, this additional 0.35% yield may partially offset the higher fee burden, though the math still favors IVV’s total cost advantage in most scenarios.

Performance and Volatility: The Diversification Premium

Over the trailing 12 months (as of January 26, 2026), IVV delivered 15.4% total return, while DIA achieved 13%. Over five years, IVV transformed a $1,000 investment into $1,814, compared to DIA’s $1,582. IVV’s outperformance reflects both its lower fees and its broader exposure to growth sectors.

The risk profile also favors IVV. DIA experienced a maximum drawdown of -43.43% over the past five years, meaning investors who purchased at the peak saw their investment decline by more than 43% at its worst point. IVV’s maximum drawdown was -27.67%—significantly less severe. This 16-percentage-point difference illustrates why concentration carries greater risk.

DIA’s higher volatility stems directly from its compressed portfolio. When a single stock among just 30 holdings declines sharply, the impact reverberates through the entire fund. With IVV’s 500 holdings, no individual company can move the needle as dramatically, providing more stability and predictable returns.

What’s Inside: Portfolio Composition Tells the Story

DIA concentrates heavily in financial services (27.5%), technology (18.9%), and industrials (15.8%), with each sector representing a significant share of assets. Top holdings include Goldman Sachs Group at 11.61%, Caterpillar at 7.92%, and Microsoft at 5.86%. This concentration means DIA holders are essentially betting on the success of a handful of mega-cap companies.

IVV takes a markedly different approach, tilting toward technology (33.65%) but spreading exposure across financial services (12.8%), communication (10.67%), and consumer cyclicals (10.5%). Its largest positions—Nvidia, Apple, and Microsoft—each represent a smaller fraction of the total fund. This broader distribution across 500 companies means investors capture growth opportunities throughout the economy, not just among the Dow’s 30 constituents.

The sector allocation differences also reveal how DIA and IVV appeal to different market outlooks. DIA’s heavy financial and industrial weighting suits investors bullish on traditional economy sectors. IVV’s technology tilt—at 33.65%—reflects the best index funds’ increasing recognition that technology drives long-term economic growth.

Risk Assessment: Matching Your Investment Timeline

The choice between these funds depends partly on your risk tolerance. DIA’s 0.89 beta (compared to IVV’s 1.00 beta relative to the S&P 500) might suggest lower volatility, but this metric misrepresents reality. DIA actually swings more dramatically because its concentrated holdings create outsized moves during market stress. The -43.43% maximum drawdown proves this empirically.

For long-term investors with 10+ year horizons, IVV’s superior diversification and lower fees make it the better choice. The index fund’s broader holding base means any single company’s poor performance gets absorbed across the portfolio, and the 0.03% expense ratio means more money compounds in your account rather than enriching the fund manager.

For investors within 5-10 years of retirement or those specifically seeking blue-chip stock exposure, DIA remains defensible. Its 1.4% dividend yield provides meaningful income, and its 30-stock format allows investors to understand exactly what they own. Some investors also prefer DIA’s concentrated bet on America’s most iconic companies.

Finding the Best Index Funds for Your Needs

The iShares Core S&P 500 ETF represents the best low-cost index fund for most investors seeking comprehensive U.S. market exposure. Its 0.03% expense ratio, superior five-year performance, lower volatility, and access to 500 companies across the full economic spectrum make it a gold-standard choice for building lasting wealth.

The SPDR Dow Jones Industrial Average ETF Trust serves a specific investor profile: those seeking income through dividends, preference for household-name blue-chip companies, and willingness to accept higher concentration risk in exchange for a simpler, 30-stock portfolio. Its track record spanning 28 years demonstrates resilience, and its 1.4% yield appeals to income-focused savers.

For the majority of investors building a core portfolio, IVV’s combination of ultra-low fees, diversification, and strong performance makes it the more compelling choice among these two index funds. The best index funds balance three qualities: minimal costs, broad diversification, and consistent execution—precisely where IVV excels. Whether you’re beginning your investing journey or optimizing an existing portfolio, understanding these differences empowers you to select the fund that truly aligns with your financial goals and risk tolerance.