Index funds have enjoyed a surge in popularity in recent years, and for good reason.
They - particularly those based on the Standard & Poor’s 500 stock index - have consistently outperformed most of the nation’s highly compensated mutual fund managers.
And while the S&P index has been getting a lot attention, the more widely recognized Dow Jones industrial average has been absent from the action - until now.
Recently, Dow Jones & Co., publisher of The Wall Street Journal, authorized for the first time use of its 101-year-old index for three different investment products: an exchange-traded fund, options and futures and options on futures.
The Dow, comprising 30 blue-chip stocks, is the most widely followed stock market indicator, tracking the world’s largest stock market.
Under the agreement, the American Stock Exchange will list a family of exchange-traded funds based on various Dow Jones indexes, beginning with the industrial average.
Like other exchange-traded funds listed on the Amex, the initial fund will allow investors to trade the entire Dow Jones industrial average as easily as they trade shares of a single stock.
Because they represent shares in an underlying trust composed of the stocks in the industrial average, the fund shares will allow investors to trade the “market” relatively easily and efficiently.
Unlike conventional open-end index funds, however, these shares will be priced and traded throughout the trading day on the floor of the Amex.
Early reports indicate that the Amex will price the fund at 1 percent of the industrial average, or about $75 a unit.
Dow Jones expects the shares, as well as the futures contracts and index options, to be on the market by fall and likely will award additional DJIA licenses at a later date.
ATM debit cards vulnerable
Automated teller machine debit cards may expose consumers to more liability for fraud than credit cards, according to the California Public Interest Research Group, a consumer organization in Los Angeles.
With a lost or stolen credit card, the most a consumer can ever pay for fraudulent charges is $50. With an ATM debit card, liability for unauthorized transactions depends on how quickly you notify the bank.
Liability is limited to $50 if the bank is notified within two days, up to $500 if the bank is notified after 2 days, and a potentially unlimited amount if the bank is not notified within 60 days.
To teach consumers more about ATM debit cards, the organization is offering a brochure called “Before You Accept an ATM Debit Card From Your Bank, Know the Facts.” For a free copy via e-mail send an e-mail message to watchdogpirg.org/ or send $2 and a selfaddressed, stamped envelope to CALPIRG, ATM Debit Card Safety Guide, 11965 Venice Blvd., Suite 408, Los Angeles, Calif. 90066.
Brochure teaches kids about cash
A 23-page book called “Kids, Cash, Plastic and You” is being offered by the U.S. Consumer Information Center. It’s designed to help parents teach children basic money management skills, including ways to save, spend, budget and invest. For a free copy write to the CIC, Pueblo, Colo. 81009, or check the Web site at www.pueblo.gsa.gov/.
Web site offers S&P ratings
InsWeb, a San Mateo-based insurance information outlet on the Internet, is offering access to Standard & Poor’s insurance ratings and research reports on 6,000 insurers. The reports are free, and you can download a single copy of any report for personal use. Check the site at www.insweb.com/.
Emerging, with wheels still on
The best stocks to own - and the hardest to find - are “emerging growth companies,” that is, firms with a great niche that are increasing their earnings at 25 percent annually or more. The problem with such stocks is that, after a few years of wild profit gains, the wheels often fly off. So you need to find companies that will keep growing.
Here are four - no guarantees, of course - from the recommended list of Smith Barney: HBO & Co., hospital information systems; Apollo Group Inc., which operates for-profit schools; Dollar Tree Stores, which “should maintain a 25 percent annual growth rate over the next five years,” says analyst L. Keith Mullins; and PMT Services Inc., credit-card processing for small merchants.
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