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Best ETF to Match Buffett's GE Play for 2010

Currently, the iShares Dow Jones US Industrial ETF (IYJ) and the Industrial Sector SPDR (XLI) provide the strongest exposure to the firm. GE currently accounts for 12% of IYJ and 13% of XLI.

While these funds are heavily weighted in GE, they are not solely reliant on the company for their performance. On the contrary, although GE has struggled throughout this year, IYJ and XLI have still gained 23% and 20% in 2009 through Dec. 18.

GE is not the only similarity between these two funds. In fact, aside from differences in weighting, both instruments share the same 10 top holdings. Among these is another prominent Buffett play: BNI. This railroad is a minor holding accounting for 3% of XLI and 2% of IYJ.

In all, I feel that the strongest play on GE and Buffett is XLI. Because of their similarities, the decision largely comes down to the variations in expense ratios and size. In both of these categories, the SPDR fund comes out on top.

XLI, which has nearly $2 billion assets under management, charges a 0.21% fee. That is considerably lower than IYJ, which charges 0.48%. The iShares fund has $273 million under management.

While I would advise investors to go with XLI, either of these instruments would be an excellent way to follow Professor Buffett into the new year.
Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
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