Standard & Poor's to Design Stock Baskets for E*Trade


In a development that underscores the growing popularity of stock baskets offered by online brokers, index provider Standard & Poor's (S&P) has inked a letter of intent with E*Trade to create custom "folios."

S&P will create baskets that reflect broad market segments, including the 20 largest stocks in the S&P 500, the 25 largest in the S&P MidCap 400, and the 30 largest in the S&P SmallCap 600.

The new offerings will also include six style baskets:

  • Large Cap Growth
  • Large Cap Value
  • Midcap Growth
  • Midcap Value
  • Smallcap Growth
  • Smallcap Value

And for the more stout of heart who wish to play market sectors, S&P will create ten sector baskets to reflect concentrated market slices like health care and financials.

In all, S&P will develop a total of 21 stock baskets for E*Trade, which should go live with the products sometime in late June, according to a company spokesperson.

Although a major index provider stepping in to design custom, ready-to-go stock baskets adds credibility to these relatively new investing tools, many in the investment community have expressed reservations about folios. Investment Company Institute (ICI) wrote a letter in July 2000 to the Securities & Exchange (SEC) Commission urging the industry watchdog to force folios to be registered under the Acts of 1933 and 1940 (to read the ICI letter, click here). However, mutual fund newsletter Fund Action recently reported that although the SEC has not rendered a binding ruling, it appears that folios will not be regulated like traditional mutual funds.

Many online brokers currently offer stock baskets, including Foliofn and Netfolio. Additionally, Charles Schwab and Fidelity are gearing up to offer stock baskets online, and could launch the products as early as the end of this summer.