Sector Index Stocks - ETF's

To contact Mike Kavanagh,CFP email to mike@moneybulletin.com Mike is a partner in the Atlanta firm of Capital Investment Advisors. You can make an appointment to visit Mike Kavanagh or his partners Mike Reiner or Curt Klein by calling Holly Evans at 404-531-0018. Mike Kavanagh's calendar is limited - so feel free to make an appointment with Mike or Curt. All three offer free initial one hour consultations.

A revolution is taking place in investing which is providing great benefits for small investors. This revolution goes by many names and different stocks have different features. However, for investors this is a radical change that will mean lower expenses and the ability to weight your portfolio to match your individual needs in a way that was really not possible before.

What I am talking about is a relatively new type of stock which goes by the following names - sector stocks (my favorite), ETF's, index shares, and then of course by the "brand" name assigned by underwriters - such as I-shares, select Spiders, WEBS, HOLDRS, etc.

Bottom line, you can now buy - as a single share of stock - ownership in scores of indexes ranging from the very broad (Wilshire 5000, Fortune 500) to the very narrow (Dow Jones 30,Morgan Stanley Tech 35). Some of the indexes are wll known like the Dow 30 and others are private indexes - such as Merrill Lynch's HOLDR stocks. Like a regular index fund, many of these are tax-friendly because there is almost no selling of stocks inside the ETF. Be careful though, some of these can have frequent changes as the indexes they follow change.

You will have to study these closely. Like regular index mutual funds, there are annual internal expenses - although they are usually very very low. Unlike many open-end funds, there usually are no regular re-investments of dividends. Sector stocks have been around for a while. You are likely familiar with the Diamonds and Spiders (DIA and SPY) which buy the Dow Jones 30 and the S&P 500 indexes. Another very popular sector stock is the NASDAQ 100 stock known as CUBES with the stock symbol QQQ.

I am using sector stocks (ETF's) as one of two main growth alternatives for my private clients. This way I can build a diversified portfolio for clients while avoiding sectors that I do not care for (i.e. industrial, chemicals, tobacco, etc.) I consider this to be a great indexing strategy.

The question for you is which of the many ETF's to choose from. You can hire a fee-based advisor like myself to make the choices for you or buy through a regular stockbroker who can supply you with the advice you need. If you do it on your own, you will have to make your way through the maze of various ETF's that are out there - with more names being added each day.

As of November 19, 2001 here is the list of what I call sector stocks and what the industry is now generally calling ETF's.

BROAD INDEX ETF's
• DOW JONES 30 (Diamond Series Trust) DIA
• NASDAQ 100 - QQQ
• ISHARES S&P 100 - OEF
• SPDR 500 INDEX - SPY
• ISHARES S&P 500 INDEX - IVV
• FORTUNE 500 INDEX - FFF
• ISHARES RUSSELL 1000 - IWB
• ISHARES RUSSELL 2000 - IWM
• ISHARES RUSSELL 3000 - IWV
• ISHARES DOW JONES TOTAL MARKET - IYY
• ISHARES S&P MIDCAP 400 - IJH
• ISHARES RUSSELL MIDCAP 800 - IWR
• S&P MIDCAP - MDY
• VANGUARD TOTAL STOCK MARKET - VTI
• VANGUARD EXTENDED MARKET - VXF

GLOBAL ETF's
• ISHARES S&P GLOBAL 100 IOO
• streetTRACKS Dow Jones Global Titans - DGT
• ISHARES S&P SMALL CAP 600 - IJR
• iShares S&P Global Energy Sector Index Fund - IXC
• iShares S&P Global Financials Sector Index Fund - IXG
• iShares S&P Global Healthcare Sector Index Fund - IXJ
• iShares S&P Global Technology Sector Index Fund -IXN
• iShares S&P Global Telecommunications Sector Index Fund - IXP

GROWTH INDEX ETF's
• ISHARES S&P 500 BARRA GROWTH - IVW
• ISHARES RUSSELL 1000 GROWTH - IWF
• ISHARES RUSSELL 2000 GROWTH - IWO
• ISHARES RUSSELL 3000 GROWTH - IWZ
• ISHARES S&P MIDCAP 400 GROWTH - IJK
• ISHARES RUSSELL MIDCAP 800 GROWTH - IWP
• ISHARES S&P SMALL CAP 600 BARRA GROWTH - IJT
• streetTRACKS Dow Jones U.S. Large Cap Growth - ELG
• streetTRACKS Dow Jones U.S. Small Cap Growth - DSG

SECTOR ETF's
• ISHARES DOW TECHNOLOGY - IYW
• ISHARES DOW TELECOM - IYZ
• ISHARES DOW UTILITIES - IDU
• ISHARES DOW CONSUMER CYCLICAL - IYC
• ISHARES DOW CONSUMER NON-CYCLICAL - IYK
• ISHARES DOW ENERGY - IYE
• ISHARES DOW FINANCIAL - IYF
• ISHARES DOW FINANCIAL SERVICES - IYG
• ISHARES DOW HEALTHCARE - IYH
• ISHARES DOW INTERNET - IYV
• ISHARES DOW BASIC MATERIALS - IYM
• ISHARES DOW CHEMICALS - IYD
• ISHARES DOW INDUSTRIAL - IYJ
• ISHARES BIOTECH - IBB
• ISHARES DOW REAL ESTATE - IYR
• ISHARES COHEN & STEERS REALTY MAJORS INDEX - ICF
• SPDR TECHNOLOGY - XLK
• SPDR CONSUMER SERVICES - XLV
• SPDR CONSUMER STAPLES - XLP
• SPDR CYCLICAL/TRANSPORTATION - XLY
• SPDR ENERGY - XLE
• SPDR FINANCIAL - XLF
• SPDR UTILITIES - XLU
• SPDR BASIC INDUSTRIES - XLB
• SPDR INDUSTRIAL - XLI
• streetTRACKS Morgan Stanley High Tech 35 - MTK
• streetTRACKS Morgan Stanley REIT - RWR
• streetTRACKS Fortune e-50 - FEF
• streetTRACKS Morgan Stanley Internet Index - MII
• ISHARES Goldman Sachs Networking Index - IGN

INTERNATIONAL ETF's
• ISHARES MSCI EAFE INDEX - EFA
• ISHARES MSCI AUSTRALIA - EWA
• ISHARES MSCI AUSTRIA - EWO
• ISHARES MSCI BELGIUM - EWK
• ISHARES MSCI BRAZIL - EWZ
• ISHARES MSCI CANADA - EWC
• ISHARES MSCI FRANCE - EWQ
• ISHARES MSCI GERMANY - EWG
• ISHARES MSCI HONG KONG - EWH
• ISHARES MSCI ITALY - EWI
• ISHARES MSCI JAPAN - EWJ
• ISHARES MSCI MALAYSIA - EWM
• ISHARES MSCI MEXICO - EWW
• ISHARES MSCI NETHERLANDS - EWN
• ISHARES MSCI SINGAPORE - EWS
• ISHARES MSCI SOUTH KOREA - EWY
• ISHARES MSCI SPAIN - EWP
• ISHARES MSCI SWEDEN - EWD
• ISHARES MSCI SWITZERLAND - EWL
• ISHARES MSCI TAIWAN - EWT
• ISHARES MSCI UK - EWU
• ISHARES S&P TSE 60 - IKC
• ISHARES MSCI AUSTRALIA - EWA
• ISHARES S&P Europe 350 - IEV
• ISHARES MSCI EMU INDEX - EZU

MERRILL LYNCH HOLDRs We do not recommend the HOLDR's because we have found them to be constantly changing - throwing off 1 to 2 shares of stocks into a broker account when changing, creating a costly mess for small investors who now must face selling 1 or 2 shares of a stock - something they did not expect when they first bought the HOLDR. Unlike other sector stocks, they are not a true index, but a collection of stocks put together by ML. But for the curious, here is the current list of HOLDRs.
• HOLDR Market 2000 - MKH
• HOLDR Pharmaceutical - PPH
• HOLDR Regional Bank - RKH
• HOLDR Semiconductor - SMH
• HOLDR Software - SWH
• HOLDR Telebras - TBH
• HOLDR Telecom - TTH
• HOLDR Utilities - UTH
• HOLDR Wireless - WMH
• HOLDR Broadband - BDH
• HOLDR Internet - HHH
• HOLDR Internet Architecture - IAH
• HOLDR Internet Infrastructure- IIH
• HOLDR B2B Internet - BHH
• HOLDR Oil Services - OIH
• HOLDR Retail - RTH