This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

2 Mega-Cap Funds for Cautious Investors

NEW YORK ( TheStreet) - Although the economic turmoil raging outside of the U.S. borders weighed on the performance of the domestic markets throughout much of November, I urge investors to avoid getting frightened away. As we have seen throughout 2010, the recovery is still intact and the markets have remained resilient.

While headwinds will certainly persist the rest of this year and into 2011, investors may want to view November's performance as a chance to take some defensive-minded steps back into the marketplace.

Mega-cap stocks are an ideal way to achieve this task. Using ETFs and mutual funds it is possible to gain access to a wide range of companies falling under this style classification.

Representing the largest of the publicly traded companies, mega caps are typically household names which have exposure to clients and customers well beyond the shores of the United States.

Whereas small- and micro-cap companies are notable for their increased volatility, investors can typically rely on companies such as Exxon Mobil (XOM - Get Report), Apple (AAPL - Get Report), and Wal-Mart (WMT - Get Report) to remain stable even in the face of economic headwinds. Given their reduced volatility, companies such as these are ideally suited for the most conservative long term investing strategies.

Investors have long had access to ETFs including SPDR S&P 500 ETF (SPY) and SPDR Dow Jones Industrial Average ETF (DIA), which track a basket of large companies. However, as the ETF industry has expanded some fund sponsors have attempted to launch funds which focus specifically on companies bearing the mega-cap classification. So far the success of these products has been bipolar.

While a small handful of these funds, such as the iShares S&P 100 Index Fund (OEF), have managed to generate a respectable following, many others have struggled to gather steam.

Products such as the iShares Russell Top 200 Index Fund (IWL) and Rydex Russell Top 50 ETF (XLG) change hands less than 50,000 times per day and I consider them too illiquid for long-term investors.

OEF's index is headlined by XOM, AAPL, Microsoft (MSFT), International Business Machines (IBM) and Proctor & Gamble (PG) which together represent 17% of the fund's portfolio. Other notable constituents include General Electric (GE), AT&T (T) and Berkshire Hathaway (BRK.A).

Aside from exposing investors to large, stable firms hailing from diverse regions of the market, OEF also pays out a comfortable 2% dividend.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $125.70 2.00%
XOM $85.36 2.10%
WMT $82.65 1.60%
SPY $208.23 1.20%
OEF $91.15 1.30%

Markets

DOW 17,981.92 +269.26 1.52%
S&P 500 2,086.97 +25.95 1.26%
NASDAQ 4,944.4280 +53.2090 1.09%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs