iShares Russell 1000 Index (ETF) (IWB)

iShares Russell 1000 Index fund invests in the large cap blend that accounts for nearly 90% of the equity traded in United States. The index is capitalization weighted providing more depth than the common Dow Jones Industrial Average or Standard and Poor 500, by offering more liquidity.

Financial services form a huge chunk about 23% of the fund with the likes of Citigroup, Bank of America apart from other consumer finance, investment banking and brokerage houses. With a busy mergers and acquisition season scheduled for the coming year, robust capital market operations, strengthening credit quality and reversal of interest rate movement makes the sector very promising. Health care and Pharmaceuticals come next in line in terms of weightage and remains a bright spot with rise in aging population in U.S, rising medication expenses with huge opportunities to monetize it research and development initiatives.

With representation in almost every sector imaginable, it is highly diversified with the top five firms accounting for just 10% of the total corpus. Though the sectors software, media and telecommunication account for a less proportion of the corpus the individual components of the same are star performers. These comprise are mainly blue chips like Microsoft, Cisco, Oracle, Liberty Media, Time Warner and Qualcom. The budget allocation for defense in United States seems to be on rise with no signs of slow down till 2010 that would help the industrial metals, energy, and aerospace and defense sector.

Analyzing the past returns it has been good with three-year average annual return of 10.84%. More it was able to post an annualized return of 15.29% for the past year ending December 2006. It has total net assets worth $3.19 billion with a expense ratio of 0.15% make it more attractive. Thus in conclusion the representation of the index being large comes with some disadvantages in the kitty. However the benefits outweigh the negatives and is all set to beat the market.