Diamonds is an informal term for an index-based exchange-traded fund (ETF) known as the SPDR Dow Jones Industrial Average ETF. The Diamonds ETF trades on the NYSE Arca exchange under the ticker symbol DIA. The ETF aims to replicate the price and yield performance of the Dow Jones Industrial Average (DJIA).
Key Takeaways
- The SPDR Dow Jones Industrial Average ETF, colloquially known as the Diamond ETF, seeks to mirror the DJIA’s performance.
- Launched in 1998, the Diamond ETF has become a favored choice for investors aiming for returns like those from the individual stocks of the DJIA.
- Owning shares in Diamonds offers investors the diversity inherent in the DJIA, with relatively low transaction fees.
Understanding Diamonds
Introduced in 1998, the SPDR Dow Jones Industrial Average ETF, known as the Diamonds ETF, is managed by State Street Global Advisors. Since its inception, it has been widely popular for providing similar returns to the underlying Dow Jones Industrial Average’s individual stocks.
Investors can buy and sell shares of this ETF just as they would common stocks. The fund includes the 30 blue-chip stocks in the DJIA, mirroring their price-weighted proportions, with some cash holdings. As of the end of 2023, heavyweights in the ETF included UnitedHealth Group, Microsoft, Goldman Sachs, Home Depot, and McDonald’s, with UnitedHealth Group comprising 9.93% of the total as of December 2023.
The Popularity of the Diamonds ETF
Diamonds are recognized as a respected fund offering access to the DJIA with low transaction fees, sporting a gross expense ratio of just 0.16%. Moreover, ETFs can provide tax advantages over mutual funds.
The ETF’s size ensures ample share liquidity, allowing investors to trade shares whenever the market is open. Its high market capitalization and liquidity generate a variety of options from which traders can choose. The NYSE allows margin trading and short-selling of Diamond shares.
On Dec. 4, 2023, the ETF had 865,652 shares traded in the prior open market day, noting that liquidity figures can change daily.
Diamonds ETF Statistics
By Dec. 5, 2023, the fund held net assets exceeding $31 billion, with over 86 million shares outstanding. The weighted average market cap was approximately $515.5 million, and the price-earnings ratio was about 18.71. A decade-long net asset value averaged 10.62%.
When considering investing in any ETF, be mindful that they aren’t insured and can incur losses. For instance, as of September 30, 2023, the ETF featured a one-month NAV of -3.43% and a quarter-to-date NAV of -2.14%. The fund’s trajectory since its 1998 inception has, however, averaged returns exceeding 8%.
Investing in Diamond Gemstones
Unlike the ETF, diamonds as gemstones are generally poor investments due to market illiquidity, lack of price transparency, and high transaction fees. Historically, investors could turn to the PureFunds ISE Diamond/Gemstone ETF, but it has been liquidated. New indexes, like the IDEX Diamond Index, now track diamond prices hourly.
Benefits of Investing in Diamonds ETF
Investing in the DIA ETF provides several advantages such as diversification across varied industries, liquidity, and broad access to the U.S. stock market. DIA ensures well-rounded exposure to many established and influential U.S. companies, featuring a blend of blue-chip stocks across multiple industries.
Risks Associated with Investing in the Diamonds ETF
The risks of the Diamonds ETF mirror those of the broader stock market, including potential capital loss and susceptibility to economic swings. These risks encompass the geopolitical and market risks associated with the 30 companies making up the ETF.
Hold Diamonds ETF in a Tax-Advantaged Account?
Yes, you can hold the DIA ETF in tax-advantaged accounts like Individual Retirement Accounts (IRAs) and 401(k)s.
The Bottom Line
The SPDR Dow Jones Industrial Average ETF (DIA) is designed to replicate the Dow Jones Industrial Average’s performance. Representing 30 significant U.S. companies across various sectors, the ETF is also known as the Diamonds ETF. It aims to offer diversification while leveraging blue-chip stocks to secure investor funds.
Related Terms: SPDR ETF, Blue-Chip Stocks, NYSE, Dow Jones, Stock Market Investments.
References
- State Street Global Advisors. “SPDR Dow Jones Industrial Average ETF Trust, DIA”.
- U.S. Securities and Exchange Commission. “Mutual Funds and Exchange-Traded Funds (ETFs) – A Guide for Investors”.
- Bloomberg. “PureFunds ISE Diamond/Gemstone ETF.”
- IDEX. “Diamond Index.”
