Index Fund Week Review:
Featured Articles
New This Week
Investor Perception of ETFs
The biggest players in exchange-traded funds, Barclays Global Investors (BGI) and State Street Global Advisors (SSgA), truly believe they've pioneered a vehicle that's perfect for index investors - low management fees, protection from taxes and turnover, and reduced index tracking error. If only people knew how great these things were, then the cash would just roll in, they figure. Financial Research Corporation conducted a survey of 892 investors to see if they view ETFs as active trading or indexing tools. Issues article by John Spence
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ETF Premiums & Discounts
Initially, critics of exchange-traded funds (ETFs) decried their trading at a significant premium/discount to net asset value (NAV), the underlying stock values they represent. So far most critics appear misinformed. The biggest flaw in their argument is their selection of end-of-day NAV figures as the measure of the true worth of a portfolio. End-of-day NAV will always be an imprecise measure of a stock portfolio, especially one with small capitalization and international equities. Includes analysis of a Morgan Stanley Dean Witter study that examines intraday price movement of MSCI Japan iShare ETF. Issues article by Will McClatchy
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Barclays Canadian ETFs
Barclays Global Investors unveiled the finishing touches on a much-anticipated line of exchange-traded funds for Canadian investors that will trade on the Toronto Stock Exchange (TSE). The new offerings include funds that track a S&P/TSE midcap index, a stock-weighted capped S&P/TSE large cap index, and several S&P/TSE sector indexes: energy, information technology, gold, and financial services. News article by Dan Hallett
indexfunds.com
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Previous Articles
SPDR Outlook
Yes, the Nasdaq market is down, but here's the multi-trillion dollar question: Is the market down enough? Since its high early in 2000, the Nasdaq 100 Index is down about 50%. Is this correction enough justification for the cuts in sales and estimated earnings by the major technology companies? How has the tech downturn affected S&P indexes and ETFs that track them? Commentary by Max Isaacman of East/West Securities
indexfunds.com
Global Sector Indexes
Dow Jones Indexes launched the Dow Jones Sector Titans Indexes, a new set of indexes comprised of global blue-chip companies. The securities in the sector indexes are culled from the Dow Jones World Index, which includes companies from 34 countries. UK-based index provider FTSE also went live with a series of global sector indexes yesterday. The FTSE family includes 11 sector indexes. News article by John Spence
indexfunds.com
Overblown
Will folios and ETFs render mutual funds obsolete? Not likely. Too often financial innovations that affect the mutual fund industry are portrayed in a black and white fashion. They are either viewed as just a curious sideshow, or else they are quickly proclaimed to be a fundamental challenge to the health, viability or even the very existence of the fund industry as we know it. Exciting new ideas are not seen as complementary to an established but evolving industry. Instead they are quickly converted in the headlines into revolutionary Davids poised with slingshot in hand to attack an oversized, lumbering and soon to be extinct mutual fund Goliath. Issues article by Gavin Quill of Financial Research Corporation
indexfunds.com
Chasing Returns
The results of studies produced by behavioral economists help us understand the behavior of individuals and the mistakes they make. Financial economists debate the value of such studies in terms of any ability to provide insights into market prices and market rates of return. However, these studies can certainly provide insights into how we might improve investor (as opposed to market) returns - and there can be a tremendous difference between market returns and the returns achieved by investors. This article examines historical performance data and the principles employed by behavioral economists to break down the detrimental effects of chasing the hot fund or sector. Issues article by Larry Swedroe
indexfunds.com
Take Our Exclusive Survey
Investors unite! Recent threads on the message boards of this website have made it abundantly clear that there is a certain discontent brewing among index investors. Sometimes it seems like there is just aren't products to meet our demand. Have you ever been frustrated by the lack of reasonably-priced, passive funds covering a certain part of equities markets? Looking for that special ultra-small emerging markets value fund to snuggle up with? Now is your chance to air it out. Issues article by Jim Wiandt
indexfunds.com
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Our discussion boards are a haven of brilliant and independent thought: Any question is welcome on the Beginner's Board, The Main Board is the central discussion forum for all matters having to do with index funds, and on the ETF Board you can banter to your heart's content about these crazy things they call exchange-traded funds that seem to be sweeping the globe and changing the face of indexing. URLs for discussion boards follow:
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Don't know what half the jargon on this newsletter means? Come and Learn. One good run through all the listed articles and tools in the Learn section, combined with some recommended reading from our Books page, should have you fully up to speed and ready for sensible index investing.
Short-Term Returns 1 wk to 2/23 1 mo to 1/31 1 yr to 1/31
Russell 2000 -4.37% 5.21% 3.69%
Russell 3000 -4.37% 3.42% -0.39%
Dow Jones Industrial -3.31% 1.02% 0.98%
Nasdaq -6.72% 12.23% -29.63%
S&P 500 -4.29% 3.55% -0.90%
3-month T-bill -2.66% 0.46% 6.31%
30 yr bond 0.39% 1.41% -14.71%
VG REIT -1.32% 0.43% 26.13%
Annualized Returns 5 yr to 1/31 10 yr to 1/31
Russell 2000
11.47% 15.12%
Russell 3000 17.51% 17.20%
Dow Jones Industrial 17.08% 17.48%
Nasdaq
21.21% 20.94%
S&P 500 18.36% 17.36%
3-month T-bill 5.36% 4.93%
30-yr bond -1.67% -
Complete Returns to 1/31/00: indexfunds.com |
