What is the “Diamonds” ETF (DIA)?
– “Diamonds” is the informal name for the SPDR Dow Jones Industrial Average ETF Trust, ticker DIA. It is an exchange-traded fund (ETF — a pooled security that trades on an exchange like a stock) that seeks to replicate the price and yield performance of the Dow Jones Industrial Average (DJIA), a 30‑stock, price‑weighted index of major U.S. companies. The fund trades on NYSE Arca and is managed by State Street Global Advisors.
Key facts (snapshot as reported late 2023)
– Launch year: 1998.
– Objective: Track the DJIA (price-weighted).
– Expense ratio (gross): 0.16%.
– Primary holdings (largest weights at end‑of‑2023): UnitedHealth Group (~9.93%), Microsoft, Goldman Sachs, Home Depot, McDonald’s.
– Size/liquidity: Reported net assets > $31 billion, > 86 million shares outstanding (figures change daily).
– Trading features: high liquidity, option chains available, margin and short-selling permitted on the NYSE.
– Note: Data above are time‑stamped (early December 2023) and will change; always check the fund’s current factsheet.
How DIA is constructed (important distinction)
– The DJIA is price‑weighted, meaning each component’s influence on the index is proportional to its share price, not market capitalization. DIA holds the same 30 stocks in roughly the same price‑weighted proportions and may hold some cash. Because of price‑weighting, a high‑priced stock can move the index more than a much larger company with a lower share price.
Definitions (brief)
– ETF: exchange-traded fund — a pooled investment that trades intraday on an exchange.
– DJIA: Dow Jones Industrial Average — 30 large U.S. companies, price‑weighted.
– NAV: net asset value — the per‑share value of the fund’s underlying holdings.
– Expense ratio: annual fee expressed as a percent of fund
ratio of the fund’s assets. Check the fund prospectus or provider website for the current expense ratio — it is charged daily (as a fraction of NAV) and reduces investor returns over time.
How DIA differs from some other broad ETFs (brief)
– Small, fixed roster: DIA holds the same 30 companies that make up the Dow Jones Industrial Average (DJIA). That is much narrower than broad-cap ETFs that track the S&P 500 or total‑market indices.
– Price‑weighted exposure: Because the DJIA is price‑weighted, DIA’s effective exposure assigns more influence to higher‑priced shares regardless of company market capitalization.
– Structure: DIA is structured as a unit investment trust (UIT). Compared with open‑end ETFs, a UIT may have limitations on active portfolio management or securities‑lending programs; check the prospectus for details on how dividends are handled and whether the trust retains cash.
Quick numeric illustrations (worked examples)
1) Price‑weighting example — why a high‑priced stock can dominate
Assume two stocks in a toy “Dow”: Stock X at $300 and Stock Y at $30. There is one share of each in the price‑weighted index (ignoring divisor adjustments).
Index level (simple sum) = 300 + 30 = 330.
If X rises 5% → X = 315; Y unchanged → index = 315 + 30 = 345 → index change = 345/330 − 1 = 4.55%.
If Y rises 50% → Y = 45; X unchanged → index = 300 + 45 = 345 → index change = 4.55% as well.
Takeaway: a relatively small percentage move in the high‑priced stock can produce the same index change as a much larger percentage move in the low‑priced stock.
2) Expense drag example
Assume DIA expense ratio = 0.16% (example; check current prospectus). If the underlying index returns 8.00% gross for the year and the ETF perfectly tracks before expenses:
ETF net return ≈ 8.00% − 0.16% = 7.84%.
Over long horizons, compounding makes the difference larger: $10,000 growing at 8% for 20 years = $46,610; at 7.84% = $45,450. Expense fees cost ≈ $1,160 in this simplified example.
3) NAV premium/discount example
If DIA’s NAV per share is $340 and the ETF trades at $341.00, the market price premium = (341 − 340)/340 = 0.294%. A persistent premium or discount can be due to intraday supply/demand imbalances, trading spreads, or tracking differences.
Checklist: how to evaluate DIA (or any ETF that tracks a price‑weighted index)
1. Confirm ticker and issuer: DIA — SPDR Dow Jones Industrial Average ETF Trust (State Street).
2. Read the prospectus for structure (UIT vs open‑end), dividend policy, and creation/redemption mechanics.
3. Verify the current expense ratio and any additional fees.
4. Check assets under management (AUM) and average daily trading volume for liquidity.
5. Examine historical tracking error (ETF return minus index return) over relevant horizons.
6. Review holdings and sector concentration; with 30 names, single stocks carry more weight.
7. Note how dividends are treated (cash distributions, frequency) and tax implications.
8. Check bid‑ask spread and typical market price vs NAV behavior.
9. Compare alternatives (other Dow ETFs, broad‑market ETFs) for cost and exposure.
Practical steps to trade DIA safely
1. Confirm your trading account supports ETFs and understands intraday trading.
2. Look up DIA’s ticker, current market price, and indicative NAV abbreviation (iNAV) on your trading platform.
3. Use limit orders rather than market orders if the spread is material.
4. Decide whether you want to hold for dividends; check expected ex‑dividend dates and distribution frequency.
5. Monitor position relative to index if you need close replication for hedging or benchmarking purposes.
6. Reassess periodically (expense ratio, tracking, liquidity) — don’t treat an ETF as a one‑time set‑and‑forget product without review.
Common use cases for DIA
– Tactical exposure to the Dow: investors who want concentrated exposure to 30 large industrial and non‑industrial blue‑chip firms.
– Dividend‑focused equity sleeve: many Dow components pay dividends; DIA distributes those to shareholders (less any withholding/fees).
– Portfolio diversification complement: as a complement to broader S&P 500 or total‑market ETFs, though overlap with large caps will be substantial.
Main risks to be aware of
– Market risk: DIA moves with large‑cap U.S. equity markets.
– Concentration risk: only 30 names, so single stock moves matter more.
– Price‑weighting distortion: weights do not reflect company size (market capitalization), which can bias sector exposure.
– Tracking error: fees, cash holdings, and UIT constraints can cause the ETF to diverge from the index.
– Tax considerations: dividend distributions may be qualified or nonqualified depending on holding period and company source; consult tax guidance.
Alternatives to consider (for comparison)
– ETFs tracking the S&P 500 (broader market exposure, market‑cap weighting).
– Sector ETFs if you want targeted exposure rather than the Dow’s blended sectors.
– Inverse/leveraged Dow products for short‑term tactical strategies (higher risk, not for buy‑and‑hold).
Resources and where to check facts (official/current information)
– State Street SPDR — DIA product page (fund documents, prospectus): https://www.ssga.com/us/en/individual/etfs/funds/spdr-dow-jones-industrial-average-etf-trust-dia
– U.S. Securities and Exchange Commission — ETF basics and investor information: