How Beginners Can Invest in the Three Major US Stock Index ETFs: Understanding How to Choose SPY, DIA, and QQQ

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Faced with the US stocks three major index ETFs, do you find it difficult to choose? First, take this “one-sentence lazy guide”:

For stable investment in the overall US market, look at SPY; if you prefer long-established industrial giants, choose DIA; if you are optimistic about the future of technology and high growth, then QQQ is your pick.

You are not alone. More and more people are joining the ranks of US stock investing:

• As of early 2025, the number of people opening investment accounts reached a new high since 2021.
• In 2024, the proportion of 25-year-olds with investment accounts increased sixfold compared to 2015.

Among them, the S&P 500 Index tracked by SPY represents about 80% of the US stock market capitalization.

Key Takeaways

• SPY, DIA, and QQQ are tools for investing in the three major US stock indices.
• SPY is suitable for stable investing, as it tracks the S&P 500 Index.
• DIA is suitable for investing in blue-chip stocks, as it tracks the Dow Jones Industrial Average.
• QQQ is suitable for pursuing high growth, as it tracks the Nasdaq-100 Index.
• Beginner investors can use dollar-cost averaging and choose the ETF that suits them.

Understanding the ETFs Corresponding to the Three Major US Stock Indices

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After understanding the “lazy guide,” you may want to learn more deeply about these three representative ETFs. They are the most direct tools for investing in the three major US stock indices, each with distinct characteristics.

SPY: Tracks the S&P 500, the Stable Choice

The full name of SPY is SPDR S&P 500 ETF Trust. When you invest in SPY, you are essentially investing in approximately 500 of the largest and most representative listed companies in the US.

SPY aims to provide investment returns that generally correspond to the S&P 500 Index. This index covers all 11 GICS sectors in the US, making it a highly diversified large-cap index.

You might be curious why the index is called 500 but holds 503 stocks (as of the end of 2024)? This is because companies like Alphabet (Google’s parent) have different classes of stocks included in the index simultaneously. Investing in SPY is equivalent to one-click buying a miniature version of the US economy.

DIA: Focuses on the Dow 30, Blue-Chip Representative

The full name of DIA is SPDR Dow Jones Industrial Average ETF Trust. It tracks the long-established Dow Jones Industrial Average, which includes only 30 companies. Do not underestimate these 30 companies; they are all leaders in their respective industries. A dedicated committee is responsible for selecting constituents, with very strict standards:

• The company must be a reputable large enterprise.
• The company needs a solid financial foundation and significant market influence.
• The committee also considers industry balance to ensure broad coverage.

Therefore, investing in DIA means concentrating your funds in the top tier of US blue-chip stocks.

QQQ: Bets on the Nasdaq-100, Growth Core

The full name of QQQ is Invesco QQQ Trust Series I, which tracks the Nasdaq-100 Index. This index has very distinct characteristics: it excludes financial companies and is mainly composed of innovative companies in technology, consumer, and healthcare sectors. To be included in the Nasdaq-100 Index, a company must meet a series of conditions, such as:

• Must be listed on the Nasdaq exchange.
• Average daily trading volume must reach 200,000 shares.
• Not in bankruptcy proceedings.

If you are confident in the future of technology and willing to bear higher volatility for potentially higher returns, then QQQ will be your key focus. It gathers the part of the three major US indices with the strongest growth momentum.

SPY vs DIA vs QQQ: Side-by-Side Comparison

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After understanding the basics of these three ETFs, you may want to know the specific differences between them. To help you make a more intuitive choice, we conduct a comprehensive side-by-side comparison from multiple dimensions such as constituents, historical performance, and fees.

For a quick grasp of the core differences, first look at this overview table:

Now, let’s dive deeper into each comparison dimension.

Constituents and Sector Distribution

The soul of an ETF lies in its holdings. The biggest differences between SPY, DIA, and QQQ are reflected in their constituent composition and sector focus.

• SPY: Its holdings are highly diversified, covering all 11 sectors including information technology, healthcare, financials, and consumer discretionary. This makes it a true reflection of the US economy. Although technology stocks have a high weight, no single sector is overly dominant.
• DIA: It includes only 30 companies, but these are household-name industry giants, such as UnitedHealth, Goldman Sachs, Home Depot, etc. Unlike SPY and QQQ which are market-cap weighted, the Dow is a price-weighted index. This means companies with higher stock prices have greater influence on the index.
• QQQ: Its sector distribution is highly concentrated. The information technology sector occupies half the landscape, followed by communication services and consumer discretionary. If you open QQQ’s holdings list, you will find that the top ten companies are almost all familiar tech giants.

You can see that although there is overlap in holdings, QQQ has much higher concentration in top tech companies.

This holdings structure directly determines your investment style: choosing SPY means broad allocation, while choosing QQQ is a heavy bet on the future of technology.

Historical Performance and Risk Comparison

Different holdings structures naturally lead to different return and risk profiles.

Core Logic: High growth usually comes with high volatility. QQQ, due to its concentration in tech stocks, often outperforms SPY and DIA in bull markets; but during market corrections, its declines can also be larger.

Let’s look at some specific data. During the market crash triggered by the COVID-19 pandemic in 2020, the market experienced severe turbulence:

You might be surprised why QQQ, known for volatility, fell less? One reason is that during the pandemic, remote work and online lifestyles actually benefited many tech companies, making them more resilient.

In terms of long-term volatility, DIA, as a blue-chip representative, has relatively lower risk. Data shows that DIA’s historical volatility over the past 5 years was 14.7%, usually lower than QQQ. This aligns with its stable blue-chip positioning. Overall, these three ETFs representing the major US indices provide you with clear choices in risk and return:

• High Risk High Return Potential: QQQ
• Market Benchmark Risk and Return: SPY
• Relatively Stable Blue-Chip Risk: DIA

Scale and Management Fees

For beginner investors, the scale (assets under management) and management fees of an ETF are two very important considerations.

• Assets Under Management (AUM): Larger scale usually means better liquidity and smaller bid-ask spreads.
  • SPY: Approximately $696.9B
  • QQQ: Approximately $399.9B
  • DIA: Approximately $41.6B

SPY is the world’s largest and most actively traded ETF, with excellent liquidity. QQQ follows closely, also with massive scale.

• Management Fees: This is the annual cost you pay to the fund company; the lower the rate, the higher your long-term returns.
  • SPY: 0.09%
  • DIA: 0.16%
  • QQQ: 0.20%

Money-Saving Tip: If you plan to hold long-term and track the S&P 500 Index, consider SPY’s two low-fee “twin brothers”: Vanguard S&P 500 ETF and iShares Core S&P 500 ETF.

The Vanguard S&P 500 ETF and iShares Core S&P 500 ETF also track the S&P 500 Index, but their expense ratios are only 0.03%, far lower than SPY’s 0.09%. For long-term dollar-cost averaging investors, this fee difference accumulates into a significant amount over time.

Although SPY is favored by short-term traders due to its long history and extremely high liquidity, for beginners with a “buy and hold” strategy, the Vanguard S&P 500 ETF and iShares Core S&P 500 ETF are more cost-effective premium choices.

How to Choose: Your Investment Strategy

Now that you have a deep understanding of these three ETFs, the next question is: which one is most suitable for you? The answer depends on your personal situation, including your risk tolerance, investment goals, and views on the market. Below, we analyze how different types of investors should choose.

Conservative Investors: SPY as the Core

If you are a conservative investor, your primary goal is usually capital preservation, rather than maximizing returns. You want lower volatility in your portfolio and relatively certain returns.

Typical characteristics of conservative investors:

• High Risk Aversion: Prioritizes principal safety, seeking investments with very low or no volatility.
• Preference for Stable Income: Favors assets that provide stable cash flows.
• Shorter Investment Horizon: May value asset liquidity more for quick access when needed.

For such investors, SPY is undoubtedly the ideal core of the portfolio.

Investing in SPY means buying a miniature version of the US economy in one transaction. It provides you with broad exposure to the US stock market, covering almost all sectors. This high diversification helps reduce risks from individual company or sector blowups, thereby improving overall portfolio stability. Many investors use SPY as the cornerstone of their portfolios and build other allocations on top of it.

Growth Investors: QQQ as the Spear

If you are optimistic about the future, believe that technological innovation is the core driver of world progress, and are willing to bear higher risks for higher potential returns, then you are a growth investor.

QQQ is precisely the sharp tool tailored for growth investors.

• Focus on Leading Tech Companies: QQQ allows you to one-click invest in tech industry leaders. As artificial intelligence, cloud computing, and semiconductors drive economic growth, QQQ provides direct participation in this technological revolution.
• Diversification Within Tech: Although QQQ is highly concentrated in the tech sector, it also covers multiple sub-sectors from software to biotechnology. For example, it includes semiconductor giants like NVIDIA and AMD, as well as cloud leaders like Microsoft and Alphabet.

Historically, due to strong growth in its constituents, QQQ’s returns often outperform broader market indices. For example, over the 15 years ending June 30, 2025, QQQ’s annualized total return was as high as 19.64%. Of course, remember that past performance does not predict future results. Choosing QQQ means pointing your investment “spear” at the areas with the greatest growth potential.

Value Investors: DIA’s Choice

The core idea of value investing is to find companies trading below their “intrinsic value”, that is, “buy good companies at cheap prices”. Value investors are usually patient and take a long-term perspective, waiting for the market to eventually recognize these companies’ true value.

Companies favored by value investors typically have the following characteristics:

• Mature business models and stable earnings records
• Experienced leadership teams
• Strong competitive advantages (such as brand loyalty)
• Return value to shareholders through dividends or stock buybacks

Although DIA is not strictly a value index ETF, the 30 blue-chip stocks in the Dow Jones Industrial Average it tracks mostly possess the qualities valued by value investors. These companies are giants in their industries, with long histories, solid market positions, and reliable profitability. Therefore, for those who agree with value investing principles but want convenient index investing, DIA is a worthwhile choice.

Portfolio Investing: How to Combine Them

You do not have to make a difficult “one out of three” decision between SPY, QQQ, and DIA. A smarter approach is to combine them to create a more balanced portfolio that aligns with your personal goals.

A very popular and effective strategy is the “core-satellite” strategy.

Core-Satellite Strategy Example: You can allocate most of your funds (e.g., 70%) to the stable SPY as the “core” of your portfolio to capture average market returns. Then, allocate the remaining portion (e.g., 30%) to QQQ as the “satellite” to enhance growth potential.

This method allows you to maintain overall stability while sharing in the dividends from high tech growth. Through systematic management, you can rebalance during market fluctuations to achieve long-term gains.

If you want a more balanced portfolio, you can also include all three ETFs representing the major US indices. For example, a simple allocation could be:

• 60% SPY: As the ballast, broadly covering the market.
• 20% QQQ: As the offensive spear, capturing tech growth opportunities.
• 20% DIA: As the defensive shield, adding blue-chip stability.

Ultimately, how to combine depends entirely on your risk preferences and investment beliefs. The key is to understand the positioning of each ETF and let them play their respective roles in your portfolio.

Beginner Guide: How to Start Your First Investment

You have mastered the theory; now it’s time to put the plan into action. Starting your first US stock investment is simpler than you think. Below, we guide you through the entire process from account opening to purchasing.

First Step in Investing: Choose an Account Opening Channel

First, you need a securities account that can trade US stocks. For investors in mainland China, there are two main channels:

1. Overseas Online Brokers: Such as Interactive Brokers, Charles Schwab, etc. They usually offer zero-commission trading with a wide product selection.
2. Mainland China Brokers’ Sub-Account Services: Trade US stocks through your familiar local broker.

To help you choose, here is a comparison of the pros and cons of the two channels:

Beginner Tip: For long-term investors seeking low costs and rich choices, opening an overseas broker account is the more mainstream choice. Many well-known brokers have eliminated minimum deposit requirements, making account opening barrier-free.

Best Strategy: Dollar-Cost Averaging

After choosing the channel, the next step is deciding how to invest. For beginners, we strongly recommend the dollar-cost averaging (DCA) method.

This is a simple yet powerful strategy: You do not need to guess market ups and downs, just invest a fixed amount (e.g., $500) at fixed intervals (e.g., the 1st of each month) to buy the same ETF.

The core advantage of this method is that it automatically achieves the logic of “buy low, sell high”. When the ETF price falls, your fixed amount buys more shares; when the price rises, it buys fewer shares. Over time, your average cost is effectively smoothed, reducing the risk of lump-sum investing at market highs.

Dollar-cost averaging helps you overcome fear or greed caused by market volatility, making it an excellent way to build long-term investment discipline.

Practical Process: Complete Purchase in Three Steps

Once prepared, you only need three steps to complete your first ETF investment:

1. Account Opening and Funding: Choose a broker and complete online account opening. Then, deposit funds into the broker account. You can use wire transfers through Hong Kong-licensed banks, or digital payment platforms like Biyapay that support fiat-to-crypto conversion, which may be more convenient for small amounts.
2. Search for ETF Ticker: After logging into the trading platform, enter the ETF ticker you want to buy in the search box, such as SPY, QQQ, or DIA.
3. Execute Buy Order: After finding the ETF, click “Trade” or “Buy”. You will see “market order” and “limit order” options. Beginners are recommended to use limit orders, that is, set a maximum buy price you are willing to pay. This avoids transacting at unexpected prices during rapid market fluctuations.

After completing these three steps, congratulations, you have successfully taken the first step in global asset allocation!

Now you understand the core positioning of SPY, DIA, and QQQ: SPY provides market breadth, DIA focuses on blue-chip value, and QQQ represents tech growth.

In the investment world, there is no absolute “best,” only the “most suitable” choice for you.

We hope you combine your own situation, use the “dollar-cost averaging” strategy, boldly take the first step in investing, and start your global asset allocation journey.

FAQ

Can ETFs go bankrupt? Is my money safe?

Your assets are safe. The stocks held by ETFs are custodied by third-party institutions, independent of the fund company. Even if the fund company goes bankrupt, your assets will not be affected. This structural design protects investors’ funds.

How should I choose between SPY, Vanguard S&P 500 ETF, and iShares Core S&P 500 ETF?

For you with long-term dollar-cost averaging, choosing the Vanguard S&P 500 ETF or iShares Core S&P 500 ETF is more cost-effective. They track the same index as SPY but have lower expense ratios. This means your long-term returns will be slightly higher due to lower costs.

Do I need to constantly monitor the market when investing in ETFs?

Not at all. For beginners, the best strategy is dollar-cost averaging. You just need to set a fixed investment plan and stick to it long-term. Frequently checking the market can easily lead to emotional wrong decisions.

Do these ETFs pay dividends?

Yes. When the constituent companies held by SPY, DIA, and QQQ pay dividends, the ETFs collect these dividends and distribute them to you quarterly in cash. You can choose to reinvest the dividends for compound growth.