What Is the Diamonds ETF?

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's objective is to provide returns that mirror the price and yield performance of the Dow Jones Industrial Average (DJIA).

Understanding Diamonds

Launched in 1998, the SPDR Dow Jones Industrial Average ETF, also known as the Diamonds ETF, is managed by State Street Global Advisors. Since its launch, it has become popular among investors as a way of achieving approximately the same returns as owning the individual stocks in the underlying Dow Jones Industrial Average.

Investors can buy and sell shares of the ETF, just like with common stocks. The fund's holdings consist of the 30 blue-chip stocks in the DJIA, in the same price-weighted proportion as they appear in the DJIA, as well as some cash holdings. At the end of 2023, the ETF was heaviest weighted in UnitedHealth Group, Microsoft, Goldman Sachs, Home Depot, and McDonalds.

The Popularity of the Diamonds ETF

Diamonds are a popular and generally well-regarded fund. Owning shares of Diamonds allows investors to attain the diversity of the DJIA with relatively low transaction fees. The fund is highly regarded for its relatively low gross expense ratio of 0.16%. Diamonds, like other ETFs, may offer some investors tax advantages over owning mutual funds.

The fund's large size provides ample share liquidity, and investors can buy or sell shares any time the exchange is open. The ETF's high market capitalization and liquidity have spawned a variety of options chains from which traders can choose. The NYSE allows investors to trade Diamond shares using margin, as well as to short-sell Diamond shares.

On any given day, the stock's exchange volume may swell or shrink. As of Dec. 4, 2023, the ETF reported that 865,652 shares had been traded in the prior open market day. Note that this figure is updated every day, and the liquidity of an ETF may dramatically change at any given time.

Diamonds ETF Statistics

As of Dec. 5, 2023, the fund had total net assets of over $31 billion, with over 86 million shares outstanding. The fund's weighted average market cap was about $515.5 million, at a price-earnings ratio of about 18.71. The fund has a 10-year net asset value of 10.62%.

It's important to remember that ETFs are not insured and may incur the loss of capital. For example, as of September 30, 2023, the ETF had a one-month NAV of -3.43% and quarter-to-date NAV of -2.14%. Since the fund's inception in 1998, the ETF had returned greater than 8%.

Investing in Diamond Gemstones

Diamonds as gemstones — not the ETF — are generally considered a poor investment vehicle, mainly due to the illiquidity of the market, a lack of price transparency, high transaction fees, and high risk related to quality assurance.

At one point, investors who wanted exposure to diamonds or other gemstones could have invested in GEMS, an ETF called PureFunds ISE Diamond/Gemstone ETF that invested in the diamond and gemstone industry. The ETF has since been liquidated and no longer exists. Since then, other indexes or funds have been created. For example, the IDEX Diamond Index was formulated and tracks diamond prices every hour.

The Bottom Line

The SPDR Dow Jones Industrial Average ETF (DIA) is an exchange-traded fund that aims to replicate the performance of the Dow Jones Industrial Average (DJIA). it's a widely recognized index representing 30 major U.S. companies across various sectors. Some investors may know it by its nickname of Diamonds ETF, and Diamonds ETF aims to bring some diversification to investors while protecting investor funds with blue chip stocks.