Dian's Column
Dian's Archive

Lavine/Liberman Archive




Lipper
Muriel Siebert & Co.


ASSORTMENT



Q: Is there a NASDAQ Index fund?
Bob from worldnet.att.net

A: Wouldn't that be sweet! With Nasdaq Composite Index up 65 percent so far this year, who doesn't want a piece of that action.

But, with more than 4850 companies are currently listed on the Nasdaq, there isn't a mutual fund that represents them all, at least not yet. There are however, funds that track the Nasdaq 100 index, and there's something called the Nasdaq-100 Shares that you might not be familiar with and just might do.

The Nasdaq-100 Shares is the name of a stock that trades under the symbol QQQ on the American Stock Exchange. Buying those shares means that you're buying a product that represents the 100 largest and most actively traded companies on the Nasdaq exchange. Some companies included are Amazon.com, Cisco Systems, Dollar Tree Stores, e-bay, Lycos, Microsoft, Oracle, Starbucks, Stewart Enterprises, and Yahoo.

When QQQ began trading on March 9, the initial price was $102.25, which represented 1/20th of the index at that time. As of December 9, QQQ shares closed at $158, up 54.5 percent. The Nasdaq 100 Index was up 54.6 percent over the same time period.

"You're trading a stock that's pegged to the index," explains John Jacobs, Nasdaq's vice president. The difference, he said, between the returns reflects expenses. And here's where understanding QQQ shares gets tricky.

Buying Nasdaq-100 Shares isn't the same as buying the stock of a company or even shares of a closed-end fund, which also trades on the major exchanges. Instead, the QQQ shares represent shares of a unit investment trust (UIT). But this is no ordinary UIT. For example, traditional UITs have expiration or termination dates and aren't used as trading vehicles. QQQ shares, however, can be traded all day long. As for the Nasdaq-100 Shares Trust expiration date, it's out 125 years.

In the risk department, expect plenty of volatility. After all, the Nasdaq market has been awfully hot lately and tress don't always grow to the sky.

For a prospectus and more information about the Nasdaq-100 Shares, contact your broker or check out www.nasdaq-100.com on the Internet.


Ready for a year-end tax guide?

State Street Research's consumer guide titled Managing Your Taxes provides basic information about tax management and tax-efficient investment strategies. It's available now and is written in English as well as Spanish and Chinese.

"We want to be certain that non-English speaking investors have access to our complete range of educational resources, including basic tax information too " says Kevin Wilkins, senior vice president at State Street Research Retail Marketing.

To order a free copy of Managing Your Taxes, call 1-888-638-3193, Monday through Friday, between 8 a.m, and 6 p.m, EST.

To read more articles, please visit the column archive.




[ top ]