Note: The featured expert is solely responsible for the content of this article. The opinions expressed herein are not necessarily those of MFI or BES, Inc.

The Most Popular Exchange-Traded Funds (ETF's)

By Doug Fabian
President, Fabian Investment Resources
Host, The Doug Fabian Show

Exchange-traded funds (ETF's) are the fastest growing asset-grabbers in the investment world. Why? Because they are less expensive to own than mutual funds and more diversified than individual stocks.

ETF's are, in essence, funds that trade like stocks. You can invest in a large-company benchmark like the S&P 500, a small company index like the Russell 2000, or a specific segment of the economy (e.g., technology, health, financial services, etc.).

If you're looking for more info, check out my list below. I've gathered the most popular ETF's and provided easy-to-understand descriptions of each.

* The Spider (SPY) - This Daddy Long-Legs of the ETF world is causing trouble for the Vanguard fund family. Why? Because SPY is cheaper to own than the Vanguard 500 fund and both do the exact same thing - mirror the performance of the S&P 500. Great way to invest in large-cap growth companies.

* The Diamond (DIA) - This beauty tracks the performance of the 30 companies in the Dow Industrials Index. If you're a big believer in Dow companies, DIAs are a great way to get exposure to the large-cap value world.

* The Cubes (QQQ) - Second biggest player on the block and the volume leader. The QQQ's track the performance of the 100 largest companies on the Nasdaq,  giving you 65% exposure to technology. If you like Cisco, Dell and Microsoft, but have trouble choosing, own them all! Check out the QQQs if you like large-cap tech.

* Middies (MDY) - It's a little known fact that mid-sized companies, mid-caps, were the best performers in the 90's. MDY has yet to catch on the way it's older brother, SPY, has. But if you're thinking about owning the S&P 400 mid-caps in a single transaction, MDY answers your call.

* iShares Russell 2000 (IWM) - They may lack a clever pet name, but IWM is an ideal way to buy the small company market. The Russell 2000 is the investment industry's premier small-cap indicator, and IWM lets you buy or sell the Russell in one smooth move. 

Select Spiders include:

* Technology (XLK) - This ETF tracks the performance of the technology sub-sector within the S&P 500. If you want 100% exposure to large-cap tech, this is the way to go. The QQQs cover the largest 100 companies in the Nasdaq, but they're not all tech.

* Financials (XLF) - Charles Schwab, Citigroup, and American International Group intrigue you? Would you rather own all of the financial giants, or do you prefer to pick and choose? If you'd like to own large-cap financial services in one basket, XLF is the ticket.

* Energy (XLE) - All of the "Ons" in one place. Gain access to Enron, Exxon and Chevron with your XLE venture. This ETF tracks the performance of the Energy sub-sector of the S&P 500.

* Consumer Staples (XLP) - What do shampoo, soda pop and prescription drugs have in common? Things we all need or, consumer staples. The S&P 500 has a sub-sector for companies like Coca-Cola, Pfizer and Jonson & Johnson. XLP's your entry pass.

* Consumer Services (XLV) - Consumers with Time Warner cable, McDonalds Value Meals for dinner and Seagram's wine coolers in the fridge might want to invest here -- large-cap consumer services giants.

iShares Sector standouts include:

* Telecom (IYZ) - Tracks the performance of the Dow Jones Telecom Index, giving you instant exposure to Verizon, AT&T, Worldcom, and other telecom giants.

* Health Care (IYH) - Mirrors the performance of the Dow Jones Healthcare Sector Index. Here's a premier and pure way to go after Bristol Myers, Eli Lilly and Merck.

* Utilities (IDU) - Want more than gas and hot air? Add electricity giants to your portfolio in one swoop.

* Tech (IYW) - You don't like S&P tech, or Nasdaq tech? Okay. Here's a way to get your large-cap tech from the Dow Jones Sector index.

* Internet (IYV) - Did you lose a fortune on a dot.bomb stock? Need more diversification, without having to pay the ridiculous expenses of Net net funds? Here's your answer.

Doug Fabian is president of Fabian Premium Investment Resource and editor of the company's four subscription-based newsletter products. For more information on these services and the highly rated Fabian Plan, including how it can help you attain your goals of growth and income using today's best no-load mutual funds, visit the Fabian web site at http://www.fabian.com/.