FundVision Classic Collection - Salil's

Author: Salil V Gangal

Friends,

Death of the Sector Mutual Funds as we know them ... Dream or Reality ?

Let's see why we invest in (or get out of) sector funds --->

1. We can 'predict' relatively easily (!) if an industry sector is about to perform well or if it has been performing well.
2. We can 'predict' relatively easily (!) if an industry sector is about to tank.
3. We get hourly NAVs (with Fido, Rydex) and unlimited switching.

Is there anything lacking in the picture above ? Any wish list ?

Sure ...

1. I may want to trade sector funds at frequency even shorter than hourly trading offered at present. Perhaps in real-time.
2. At times, I will love to short some sector funds.
3. I want to keep a tab on the fund's NAV almost like I can keep checking the value of the index.

Tall order ... Is there any organization out there that feels upto taking up the wish list ?

Apparently there is. The name of the organization is American Stock Exchange, and the Sector Fund like investment vehicles they have are the Sector Spiders !

The way AmEx describes the Sector Spider is --->

"The Sector SPDR Trust (the "Trust") is an "index fund" consisting of a number of separate investment portfolios (each a "Sector SPDR Fund" or a "Fund" and collectively the "Sector SPDR Funds" or the "Funds")."

After giving the investors S&P 500 and S&P 400, American Stock Exchange has filed for Sector Spiders. They are

• The Basic Industries Sector SPDR Fund
• The Consumer Services Sector SPDR Fund
• The Consumer Staples Sector SPDR Fund
• The Cyclicals/Transportation Sector SPDR Fund
• The Energy Sector SPDR Fund
• The Financial Sector SPDR Fund
• The Industrial Sector SPDR Fund
• The Technology Sector SPDR Fund
• The Utilities Sector SPDR Fund

Of course these will not replace (no death yet - so definitely a dream J) the Sector Funds as we know them. But sure will pose a formidable challenge to the Sector Funds.

Comments please ...

I know. I know. J You want to know more. Click here to read the SEC filed prospectus - All that one may need to know *tic*.

Looks like what we have is sector index funds with ER comparable to Vanguard's, convenience comparable to Fidelity's and they trade like stocks ! Wow.


Regards,

I guess many are awaiting eagerly the arrival. (Nope - I don't know when they will be available for trading.)

But here is some info which will make the references easy in the coming months (years) ...

A while a go I had written about Sector Spiders ... Will need to update it.

Click on "FVCC" and go to "Salil's" for that article.

Regards,