3/23/01 Index Funds
Featured Articles
New This Week
Market Momentum
In an article in the October 2000 issue of the Journal of
Finance, Charles M.C. Lee and Bhaskaran Swaminathan presented their
findings on a study examining whether past returns and past trading volumes
had predictive value in terms of future returns. What the authors of the
study demonstrated was that those stocks that are rising tend to continue
to rise over the short term. However, over the intermediate term they
experience a reversal. The stocks that have risen the most on the most
trading volume tend to experience the fastest and sharpest reversals. The
stocks that experience these spikes and collapse tend to be growth stocks.
Issues article by Larry Swedroe
indexfunds.com
Tech ETFs
A new iShares exchange-traded fund (ETF) began trading on the
American Stock Exchange on Monday. The Goldman Sachs Technology Index Fund
(trading symbol: IGM) will track the Goldman Sachs Technology Index, and
has an expense ratio of 0.50%.The index is comprised of over 200 companies
in the following industries: producers of computer-related devices,
electronics networking and Internet services, producers of computer and
Internet software, consultants for information technology and providers of
computer services. News article by IndexFunds staff
indexfunds.com
Active vs. Passive
"Active management works better than passive index funds for
small-cap and international funds." This notion is so widespread that it
has become conventional wisdom in financial circles. We attempted to
address some of the issues that have dogged active/passive studies in the
pass. First, we looked at investable returns, not index returns. We chose
benchmark index funds to measure the performance of the field, and of
course only included small-cap funds in our survey, eliminating the natural
bias that exists when, for example, you compare the large-cap performance
of the S&P 500 with a relatively small-skewed group of mutual funds.
Advanced article by Jim Wiandt
indexfunds.com
--------------------------------------------------------------------
Previous Articles
New Swiss ETF
The SWX Swiss Exchange announced the launch of an
exchange-traded fund (ETF) that tracks the Swiss Market Index. This broad
benchmark is a cap-weighted index that contains 29 Swiss blue-chip
companies which represent 80% of the total capitalization of Switzerland's
equities market. The ETF trades under the symbol XMTCH. The new ETF joins
two others that trade on the Swiss Exchange: STOXX 50 LDRS and Euro STOXX
50 LDRS, which are also cross-listed on the German Deutsche Borse and the
Euronext exchange. The Swiss Exchange said it plans to further expand its
ETF offerings in the coming months. This article also contains a wrap-up of
the major news stories from the past week. News article by IndexFunds
staff
indexfunds.com
S&P 500 Index Funds
So you've done your research, poked around the discussion
boards on this site, and have come to conclusion that you want to sleep
well at night and invest in an index fund. Congratulations. By far, the
index with the most money benchmarked to it is the Standard & Poor's (S&P)
500 Index, with over a trillion dollars. There are gaggles of index funds
out there that seek to replicate the returns of the S&P 500, and the
beginning investor may feel overwhelmed by all the options. It seems simple
enough: the fund tracks the index, so the manager just rebalances the fund
when changes are made to the index. So why so many funds that track the S&P
500? The answer is that fund managers are competing for your money, and
ultimately you reap the benefits. Issues article by John Spence
indexfunds.com
ICI Study
Using mutual fund redemption rates to determine investor
holding periods isn't kosher, according to recent research by Investment
Company Institute (ICI). The problem with redemption rates, which measure
annual fund redemptions as a percentage of average assets, is that a small
minority of high-turnover shareholders can significantly jack up a fund's
redemption rate. This scenario can potentially skew the holding period of
the typical fund investor if it is calculated using redemption rates.
Issues article by John Spence
indexfunds.com
Free Investment Advice
The Vanguard Group and Financial Engines have inked an alliance
that will allow retail investors of Vanguard funds to receive portfolio
investment advice at no charge. Vanguard will initially offer the service
in the second quarter to participants in employer-sponsored retirement
plans, and later to Vanguard fund individual investors. The package was
originally designed for retirement planning, but Financial Engines is
expanding the service to allow retail investors to analyze an entire
investment portfolio. News article by John Spence
indexfunds.com
--------------------------------------------------------------------
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:
indexfunds.com
indexfunds.com
indexfunds.com
--------------------------------------------------------------------
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 3/23 1 mo to 2/28 1 yr to 2/28
Russell 2000 0.33% -6.56% -16.84%
Russell 3000 -0.87% -9.14% -10.33%
Dow Jones Industrial -3.24% -3.60% 3.62%
Nasdaq 2.00% -5.53% 5.79%
S&P 500 -0.93% -9.11% -8.19%
3-month T-bill -5.44% 0.43% 6.26%
30 yr bond 0.67% -3.59% -12.98%
VG REIT -1.76% -1.72% 25.86%
Annualized Returns 5 yr to 2/28 10 yr to 2/28
Russell 2000
9.29% 13.14%
Russell 3000 14.94% 15.25%
Dow Jones Industrial 13.86% 12.34%
Nasdaq
12.83% 12.06%
S&P 500 15.90% 15.44%
3-month T-bill 5.36% 4.92%
30-yr bond -3.84% -
Complete Returns to 2/28/00: indexfunds.com |
