What Is the (DIA) Diamonds ETF?

Using the DIA to Gain Exposure to the DJIA Index

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A lot of investors, both expert and novice, like to invest in the market. And a lot of investors like to do so through the Dow Jones Industrial Average Index. But there is an easier, shinier way to invest in the DJIA Index than buying stocks in a basket.

Diamonds (DIA) ETF

The DIA -DIAMONDS Trust, Series 1 ETF follows the price and performance of the Dow Jones Industrial Average (DJIA) Index. By purchasing the DIA ETF, you are essentially buying an investment asset that acts as the DJIA index but is a simpler transaction. There is a direct correlation between the DIA and the DJIA index, but you don’t have to purchase multiple stocks in a basket to achieve your goal. One transaction gives you the exposure you’re seeking.

Advantages of Buying the DIA ETF

It only takes one transaction to gain exposure. You don’t have take make multiple bids or offers in order to hit your target price. And each transaction is complete, unlike a basket which can go unfilled. And fewer transactions does not only make investing easier, but it helps with keep transaction costs and brokerage fees under control.

On top of the advantages of the DIA ETF, you reap the benefits of ETFs in general as well. This includes the tax benefits, which are a huge advantage over other investments like mutual funds.

Disadvantages to Buying the Diamonds ETF

While you are buying an asset that emulates the DJIA index, you are not truly buying the index. There is a direct correlation not an exact correlation, so there can be some tracking error. However, isn’t the point of buying the DJIA index a way to emulate the stock market as a whole? So the DIA can also be considered a similar asset to the index; a way to gain exposure to the market.

And ETFs are not without their disadvantages as well. No investment is perfect and all come with risk. So it comes down to the proper research and determining if the DIA or any ETF is the right fit for your portfolio.

What's in the DIA ETF

The trust for the DIA exchange traded fund not only holds the same stocks as the DJIA but some cash as well. This helps with the liquidity of the fund and also aides with the tracking process. And while the DIA is not an actively managed ETF, adjustments do have to be made to the assets in the fund in order to correct any tracking discrepancies.

As for the sector allocation, industrial metals is the current largest sector represented in the ETF, followed by the hardware and energy sectors. And media and software are two of the smaller industries in the fund.

You’ve definitely heard of a lot of the stocks in the fund. Johnson and Johnson (JNJ), McDonald's (MCD), Coca-Cola (KO), Exxon Mobil (XOM), and other popular companies as well.

Investing in the Diamonds ETF

There is no answer to whether or not you should invest in the Diamonds ETF as every investment should be based on a case-by-case basis. However, what I can say is that the DIA is a good way to gain exposure to the market and DJIA index if that’s your goal. It’s always important to conduct thorough research before making any investing decision, but from there the decision is yours. Who knows, maybe the DIA is that diamond-in-the-rough investment you are looking for.