Newspaper article THE JOURNAL RECORD

Diamonds Sparkle Stock Investor Eyes

Newspaper article THE JOURNAL RECORD

Diamonds Sparkle Stock Investor Eyes

Article excerpt

BOTHELL, Wash. -- David Kronfield sold his tanning salon in Bothell two years ago to focus on investing, mostly in local companies he knew best. What his portfolio lacked was exposure to the broader market to lessen the impact of big swings in his individual stocks and options.

Kronfield and thousands of other individual investors are turning to "Diamonds," a month-old American Stock Exchange product -- an openly traded trust that mimics the performance of the Dow Jones industrial average.

"I had my head handed to me a few times with the options," he said. "I was looking for a more moderate way to play the market." Diamonds are the latest security that lets people invest in the Dow without buying the 30 individual stocks. A mutual fund, the ASM Index 30 Fund, also tracks the Dow, the most widely followed stock market indicator. "The Dow is something I'm familiar with," Kronfield said. He said he lacked the knowledge and money to invest in each of the 30 stocks that make up the average. "It's a cheap and easy way to diversify." Kronfield bought 100 Diamonds on Jan. 22, two days after they started trading at 77 1/8. They've since gained about 10 percent to 84 3/4. The exchange originally issued 500,000 shares. The popularity of the product has swelled that number to 2.5 million. Diamonds came to market just after the Dow finished its best three-year stretch since the 1930s. The average returned 37 percent in 1995, 29 percent in 1996 and 25 percent last year, with dividends reinvested. The American Stock Exchange also trades a similar product called "Spiders" that tracks the Standard & Poor's 500 Index, the benchmark used by most professional investors. Because the S&P 500 offers a broader exposure to the stock market, it may be less risky than investing in the 30 Dow stocks. Still, the Amex has taken advantage of the familiarity of the Dow name among individual investors to sell the Diamond and has engaged in a national television and print advertising campaign. …

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