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(Jonathan Hayward/THE CANADIAN PRESS)
(Jonathan Hayward/THE CANADIAN PRESS)

Index-Based Investing

Want to invest in a champion? Add to ...

The first medals of the Vancouver Winter Olympics won't be handed out for more than three weeks, but investors in the major sponsors of the Games are already on the podium.

The Dow Jones Summer/Winter Games Index, composed of 36 publicly listed companies that are official partners, sponsors and suppliers of the Games, has risen 47 per cent since December, 2008 (when its composition was changed to reflect Vancouver 2010 sponsorships).

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That's swifter, higher, stronger than Dow Jones's major benchmark indexes. It's almost double the 26-per-cent returns achieved by the Dow Jones industrial average and the Dow Jones Global Titans 50 Index (Dow's index of the world's biggest blue-chip stocks) over the same period.

It also tops the 30-per-cent gains on the S&P 500 and the 41-per-cent rise of the S&P/TSX composite index.

The Summer/Winter Games Index is one of Dow Jones's "thematic" indexes - each of which focuses on stocks linked by a similar theme in their businesses.

Other thematic indexes include the Dow Jones U.S. Economic Stimulus Index, which comprises 50 major U.S. companies expected to benefit from the U.S. government's economic stimulus spending package; and the Dow Jones Luxury Index, made of up companies that generate the bulk of their revenues from luxury goods and services.

While some of Dow's thematic indexes cover more serious investing themes (such as the Dow Jones Precious Metals Index and the Dow Jones Internet Composite Index), the Summer/Winter Games Index is largely intended as a promotional tool for Dow's index products.

Dow Jones Indexes spokeswoman Nicole Wesch said the company introduced the index in late 2007 as a more approachable way to help introduce and educate the general public to what stock indexing is all about. "It brings the idea of indexing down to a more basic level," she said.

However, the index is evolving into a more serious tool for investors looking to tap into the Olympic marketing niche. Dow Jones has licensed the index to be used as the basis for financial products.

She said the first licensee to launch such a product is JPMorgan Chase & Co., whose Canadian operations offer clients a structured product (a privately sold investment vehicle similar to a passive mutual fund or exchange-traded fund) that mimics the index.

While the Summer/Winter Games Index has had an impressive and profitable run in its lead-up to the Vancouver opening ceremonies, Dow Jones did note that there was one more mainstream approach to index investing that would have delivered even better returns for Canadian investors.

The Dow Jones Canadian Titans 60 Index, Dow's benchmark of Canadian blue-chips, surged 64 per cent since December, 2008 - led by several high-flying mining stocks.

The lesson? At least for these Canadian Games, the best way to beat the medal winners was with the metal winners.

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Olympic winners

The top 10 in the Dow Jones Summer/Winter Games Index:

Country Company Weight
U.S. General Electric 10.02%
U.S. McDonald's 9.84%
Canada Royal Bank 9.67%
U.S. Coca-Cola 9.11%
Canada Suncor Energy 8.30%
U.S. 3M 8.15%
U.S. VISA 6.04%
U.S. Dow Chemical 5.24%
Japan Panasonic 5.07%
Canada TransCanada 3.46%
Source: Dow Jones; as of Jan. 19, 2010
 

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