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 what if I told you there was an easier, shinier way to invest in the DIJA Index than buying stocks in a basket? Guess what, there is.
What is the 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 DIJA index, but is simpler in transaction. There is a direct correlation between the DIA and the DIJA 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.
What is the Advantage 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 less transactions does not only make investing easier, but it helps with keep transaction costs and brokerage fees under control.
Are There Disadvantages to Buying the Diamonds ETF?
While you are buying an asset that emulates the DIJA 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 DIJA 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 have 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 DIJA, 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 and 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), McDonalds (MCD), Coca Cola (KO), Exxon Mobil (XOM), and other popular companies as well.
Should I invest in the Diamonds ETF?
There is no answer to this question 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 DIJA 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.