Table of Contents
- What Is the Diamonds ETF?
- Understanding the Diamonds ETF
- A Quick Fact on Holdings
- Why the Diamonds ETF Is Popular
- Key Statistics for the Diamonds ETF
- Investing in Actual Diamond Gemstones
- Benefits of Investing in the Diamonds ETF
- Risks Associated with the Diamonds ETF
- Holding in Tax-Advantaged Accounts
- The Bottom Line
What Is the Diamonds ETF?
Let me explain the Diamonds ETF to you directly. It's an informal name for the SPDR Dow Jones Industrial Average ETF, which trades under the ticker DIA on the NYSE Arca exchange. This ETF's main goal is to match the price and yield performance of the Dow Jones Industrial Average, or DJIA, by holding the same 30 blue-chip stocks in the index.
Understanding the Diamonds ETF
I want you to know that the Diamonds ETF was launched in 1998 and is managed by State Street Global Advisors. It's gained popularity because it lets you get returns similar to owning the individual DJIA stocks without buying them all separately. You can trade shares of this ETF just like regular stocks. The fund holds those 30 blue-chip stocks in the same price-weighted setup as the DJIA, plus some cash. At the end of 2023, the heaviest weights were in UnitedHealth Group, Microsoft, Goldman Sachs, Home Depot, and McDonald's.
A Quick Fact on Holdings
Here's a fast fact for you: As of early December 2023, UnitedHealth Group made up 9.93% of the SPDR Dow Jones Industrial Average ETF Trust.
Why the Diamonds ETF Is Popular
You should understand that the Diamonds ETF is popular and well-regarded. By owning its shares, you gain the DJIA's diversity with low transaction fees. It has a gross expense ratio of just 0.16%, which is attractive. Compared to mutual funds, ETFs like this might give you tax benefits. The fund's size ensures good liquidity, so you can buy or sell shares anytime the exchange is open. Its high market cap and liquidity support various options chains for traders. The NYSE lets you trade on margin or short-sell these shares. Trading volume varies; on December 4, 2023, 865,652 shares traded the previous day, but remember, liquidity can change quickly.
Key Statistics for the Diamonds ETF
Let me give you the stats as of December 5, 2023: The fund had over $31 billion in total net assets and more than 86 million shares outstanding. Its weighted average market cap was about $515.5 million, with a price-earnings ratio of 18.71. The 10-year net asset value return was 10.62%. Keep in mind, ETFs aren't insured, and you could lose capital. For instance, as of September 30, 2023, it had a one-month NAV of -3.43% and quarter-to-date of -2.14%. Since inception in 1998, though, it's returned over 8%.
Investing in Actual Diamond Gemstones
Now, don't confuse this with actual diamonds as gemstones, which I see as a poor investment due to illiquidity, lack of price transparency, high fees, and quality risks. There used to be an ETF called PureFunds ISE Diamond/Gemstone ETF (GEMS) for exposure to the industry, but it's liquidated now. Alternatives like the IDEX Diamond Index track diamond prices hourly.
Benefits of Investing in the Diamonds ETF
Investing in the DIA ETF gives you diversification across industries, liquidity, and access to the U.S. stock market. It exposes you to established U.S. companies, with blue-chip stocks spanning various sectors.
Risks Associated with the Diamonds ETF
The risks mirror those of the stock market: You can lose capital, and it's vulnerable to economic swings. It also inherits risks from its 30 companies, like geopolitical or market risks.
Holding in Tax-Advantaged Accounts
Yes, you can hold the DIA ETF in accounts like IRAs or 401(k)s for tax advantages.
The Bottom Line
In summary, the SPDR Dow Jones Industrial Average ETF (DIA) replicates the DJIA, a key index of 30 major U.S. companies. Known as the Diamonds ETF, it offers diversification and protection through blue-chip stocks.
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