New e-mail address is mike@moneybulletin.com.
Mike is available for personal financial counseling on a fee-only basis. Your first one hour appointment with Mike or one of his partners is no cost and no obligation. To schedule an appointment with Mike or one of his partners, call Natalie Lee at 404-531-0018.
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 - index 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. Index 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 index 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, 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 January 2004 here is the list of what I call index stocks and what the industry is now generally calling ETF's.
BROAD INDEX ETF's
GROWTH INDEX
ETF's
VALUE INDEX ETF's
SECTOR ETF's
INTERNATIONAL ETF's
BOND ETFs
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, this is
the current list of HOLDRs.
And now the links for further research:
* Not meant to be an offer to buy or sell specific securities. This is not a complete analysis of any company, industry, or security. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources considered reliable but no representation is made as to their completeness or accuracy. There is no certainty that the parameters, assumptions or market conditions
can be duplicated in actual transactions.
Some higher yields may involve below investment grade securities which can present significant risks, including, among other risks, higher risk of default on interest and principle payments, the risk of lower market liquidity, and the risk of greater market price fluctuation than those of investment grade securities.
