Large-Cap ETFs Weather Stock Slump
09/16/08 - 02:35 PM EDT
Billy Fisher
Large-cap ETFs are becoming more attractive by the day.
The topsy-turvy conditions of the S&P 500 have pushed the CBOE Volatility Index up by 21% in the past month as investors brace for a tough road ahead. This uptick in volatility is providing a strong case to take cover in large-company shares, which are at the heart of well-balanced portfolios built to hold up in stormy weather. Adriana Posada, a portfolio manager of the American Beacon Large Cap Value Fund(AAGPX Quote - Cramer on AAGPX - Stock Picks), stresses the importance large-cap equities. "They should be the bedrock of an individual investor's portfolio because they tend to be less volatile," she said. Posada notes that an ETF or mutual fund can prove to be a cost-effective method to obtaining large-cap exposure. "Buying a basket of stocks is a very good option," she said. "It can be difficult for an individual investor to build a diverse portfolio if they do not have a high net worth." Large-cap ETFs such as the iShares S&P 500 Index(IVV Quote - Cramer on IVV - Stock Picks) and the PowerShares QQQ Trust (QQQQ Quote - Cramer on QQQQ - Stock Picks), which track the S&P 500 and the Nasdaq 100 Index, respectively, have had a rough go so far in 2008. These funds are down 14.4% and 15.0%, respectively. Last year, they rose 3.3% and 17.9%. Large-cap ETFs that subscribe to a particular investing style have not fared any better. For instance, the Vanguard Growth ETF(VUG Quote - Cramer on VUG - Stock Picks), a fund comprised predominantly of large-cap names such as Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks), Apple(AAPL Quote - Cramer on AAPL - Stock Picks) and Google(GOOG Quote - Cramer on GOOG - Stock Picks), has declined 13% year-to-date. The picture for value has been equally sluggish. The Vanguard Value ETF(VTV Quote - Cramer on VTV - Stock Picks), which holds names such as ExxonMobil(XOM Quote - Cramer on XOM - Stock Picks), Chevron(CVX Quote - Cramer on CVX - Stock Picks) and Pfizer(PFE Quote - Cramer on PFE - Stock Picks), has slid 16%.
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