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In the investment arena, a hybrid is an investment vehicle that combines two different kinds of underlying securities, like say a stock and a mutual fund. Hybrids are also called derivatives. As for a stock and mutual fund combo, the world refers to them as exchange traded funds or ETFs.

Anytime Wall Street starts combining products, the outcome is typically something that's pretty hard to fully understand----and ETFs are no exception. But if you think of these investment vehicles as index funds that you can trade all day long, just as you could a stock, you'll get the idea.

Wonder about their intricacies, however, and you'll probably be bored to death, blown away or left in a fog. Or, wonder if they'll hold water through turbulent markets or over the long haul and no one really knows for sure. That's because the first ETF, called a SPDR, pronounced "spider" which stands for S & P 500 Depository Receipts and has the ticker symbol of SPY, has only been around since 1993.

In spite of their relative newness, ETFs have made a decent sized dent in the market place. In the past seven years, the number of them has swelled from one to well over 50 with assets currently totally approximately $65 billion. That's according to Wiesenberger, a Thomson Financial company, and the only financial research firm currently tracking their performances.

One reason for the ETFS popularity is due to the impact that index funds have had in the market over the past few decades.

"The big lesson of the last quarter century of investing, " says Patricia Dunn, CEO of Barclays Global Investors, "Has been that the markets are what formed the foundation of returns for investors not individual securities."

Dunn said that index funds are now held in over 40 percent of institutional portfolios in the U.S. and that there's a place for them in the retail investors' portfolios as well.

"Individual stocks are certainly a great way to make bets on individual companies but they are not a very powerful way to build an investment program or to create an asset allocation solution. (Barclay's) iShares can provide a tool kit for investors and their advisors to build on a sector, style, or country basis, the asset allocation that's appropriate to meet the individual investors needs," said Dunn.

.Look through the roster of existing ETFs and if you think they might be a fit for you, Barclays iShares offer more choices than anyone else. Currently, there are iShares available on all sorts of indices from the MSCI Australia Index to the UK's, the Dow Jones US Basic Materials index to the Technology index, and the Russell 1000 to the S & P SmallCap 600 index.

But before you invest, keep in mind that ETFs aren't the same as the open-ended mutual fund that most folks own shares of. For openers, they can only be purchased via a broker or financial planner. Consequently, there are no such things as no-load ETFs. All of them, be they iShares from Barclays, HOLDRS from Merrill Lynch or SPDRs from State Street Global Advisors, require commissions to be paid each time you buy and sell shares of them.

They also aren't for someone who likes likes purchasing a small number of shares on a regular basis. Commission costs don't make that a good idea. Or, for those who like owning shares of a mutual fund from a fund family in which services like being able to exchange one fund's shares for another's is customary. ETFs don't come with value-added services.

On the other hand, their annual management fees are low, currently ranging between 0.20 to 0.6 percent per year depending upon the ETF. And they are designed to be tax efficient.

From the regulatory side, ETFs are created under the same laws and have the same governing bodies that mutual funds have. And, just as any other mutual fund shareholder, what you're investing into is a portion of a pool, or basket, of securities. As for their management, consider them to be passively not actively managed.

To learn more about ETFs, contact your broker or financial planner. Or visit these web sites: www.ishares.com, www.spdrindex.com, and www.holdrs.com.

To read more articles, please visit the column archive.

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