Is there a place in your investment portfolio for Diamonds, SPDRS and/or WEBS? Are Diamonds measured in karats? Do the SPDRS spin webs and do the WEBS have spiders? If the answer to each of these questions is no – and it is – then exactly what do these exotic acronyms represent and how might they fit into your investment portfolio?
SPDRS (SPY) – The Standard & Poors Depository Receipts began trading in February 1993. This security provides an individual investor the opportunity to buy or sell the 500 largest capitalized stocks of the S&P 500 Index in one transaction. Currently, 10 stocks represent 22 percent of this index: Microsoft, General Electric, Intel, IBM, Cisco, Wal-Mart, Lucent, Exxon, Merck and Citigroup. Since this is a market-capitalized index, at the present time, Microsoft affects the performance of the SPDRS more than Citigroup.
With the success of SPDRS, last December the American Stock Exchange began trading nine Sector SPDRS, which unbundled the S&P 500 Index and assigned each stock to a different market sector. The nine sectors are: Basic Industries, Consumer Services, Consumer Staples, Cyclical/Transportation, Energy, Financial, Industrial, Technology and Utilities. Since the Select Sectors are also market-capitalized, it is important to check the most influential stocks in each “The volatility in the market in the past year makes it vitally important that an investor carefully consider all options in order to determine the appropriate ‘mix and match’ strategy for his or her portfolio.” Select Sector SPDR before deciding whether to add these to your portfolio.
Diamonds (DIA) – the Dow Jones Diamonds began trading in January 1998. This security allows investors to buy or sell the 30 Dow Jones Industrial Average stocks in a single transaction. A major difference between the Diamonds and the SPDRS is that Diamonds is a price-weighted index rather than a capitalized-weighted index. For example: a one-point move in a $30 stock and a one-point move in a $100 stock each equate to a little over a five-point move in the Dow Jones Industrial Average.
WEBS – World Equity Benchmark Securities is a series of 17 country-specific securities. WEBS provide an investor with the opportunity to invest in a basket of publicly traded foreign stocks in a specific country. The objective of the WEB series is to track-the Morgan Stanley Capital International (MSCI) Index for the specific country. The following countries are included in the WEB series: Canada, Germany, Hong Kong, Italy, Japan, Spain and the United Kingdom.
In addition to the above, there are several other index-based securities which provide an investor the opportunity to buy or sell a basket of securities in one transaction. One of these securities is the NASDAQ 100 Trust (QQQ). Based on capitalization, the 10 largest holdings are: Microsoft, Intel, Cisco, MCI Worldcom, Dell, Qualcomm, Sun Microsystems, Nextel, Oracle and Amgen.
The above options and the volatility in the market in the past year make it vitally important that an investor carefully consider all options in order to determine the appropriate “mix and match” strategy for his or her portfolio.
More information about these and other new index products can be found on the Internet at amex.com or from a qualified financial advisor. •
Margaret E. Maul, CFP, CIMA, is the managing director/CEO of Maul Capital Management, investment and wealth management advisors. An investment advisor for more than 20 years, Maul served as senior vice president of Investments at Prudential Securities for I 3 years before starting her own company.
NAREIT publishes resource covering REITS
The National Association of Real Estate Investment Trusts (NAREIT) is now publishing Real Estate Portfolio, a bimonthly periodical offering information on real estate investment trusts (REITs) and publicly traded real estate. The magazine represents the only publication focused exclusively on the REIT industry, and features such information as technology and Internet advancements, industry trends and news and departments containing insight from industry professionals. – MARGARETE. MAUL, CFP, CIMA
Sentinel Funds launching growth fund
Montpelier, Vt.-based Sentinel Funds is launching its Sentinel Growth Index Fund, which the company has designed to match composition and performance (before expenses) of the Standard & Poor’s/BARRA Growth Index. Sentinel’s option will buy the same 125 names held by the S&P/BARRA Growth Index. The BARRA Index is a subset of the Standard & Poor’s 500 containing primarily large capitalization growth companies with the highest price-to-book ratios.