EXCHANGE TRADED FUNDS (ETFs) Style Index Portfolios trade securities that track various market indexes. These “style indexes” include large-cap growth, large-cap value, small-cap growth and small-cap value indices. We believe the best vehicles for trading style indexes are Exchange Traded Funds (ETFs), the fastest growing financial product in the United States. First launched in the early 1990s, ETFs are securities that combine elements of index funds, but do so in a different way. Like index funds, ETFs are pools of securities that track specific market indexes at a very low cost. Like stocks, ETFs are traded on major U.S. stock exchanges and can be bought and sold at anytime during normal trading hours. Trading style indexes allows investors to gain well-diversified exposure to a specific area of the market. And, since an ETF holds a basket of stocks, one bad stock performer should have only a minimal effect on the price of the ETF. Table 1 shows the ETFs that Legarza Vomund tracks. Table1. Exchange Traded Funds Ticker ETF DIA Diamond QQQ Nasdaq 100 ETF SPY S&P 500 SPDR MDY MidCap SPDR IJS iShares Small-Cap Value IJT iShares Small-Cap Growth IWM iShares Small-Cap Index Goals We used the lessons from the worst bear market since the 1930s to create the Style Index Portfolios. Here are our goals: Take full advantage of bull markets by rotating to aggressive instruments. Perform better than the S&P 500 Index during bear markets as well as bull markets. To achieve this goal, the portfolio should attempt to move out of aggressive securities and move into more conservative, value-based stocks during bear markets. Be flexible enough to allow the portfolios to invest in the large-cap, mid-cap, or small-cap arena, whichever is doing best. Along the same lines, the portfolios should concentrate in growth issues when growth investing is in favor and focus on value issues when value investing appears to be appropriate. Long-term investors should feel comfortable with the strategy.   Vomund Investment Management Home Page Copyright © 2008 Vomund Investment Management, LLC. All rights reserved. Past performance does not guarantee future results.