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Dodging the terrible ten gives smoother ride

Friday 2nd May 2003

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The abysmal share price performance of some of our biggest listed companies over the past few years is no secret.

As a result the NZSE40 index has struggled to beat inflation.

The far-better performance of the smaller companies included in the index is pretty well known too. The problem for investors has been harvesting that growth without exposing themselves to the big companies.

For investors who want a broad exposure to the economy but have neither the large amounts of capital needed to own individual shares, nor the time and expertise to stock-pick, one solution is buying units in The New Zealand Mid Cap Index Fund.

The fund, Stock Exchange ticker MDZ, is a group investment fund whose units are listed and traded.

Its assets are a basket of shares which tracks the exchange's Mid Cap Capital Index. This comprises the 30 companies below the NZSE top- 10 index, excluding the most illiquid (least traded) stocks and those whose primary listing is on an overseas exchange.

It's run by ABN Amro Craigs.

Over the past five years units in MDZ have risen about 70%, a creditable performance by anyone's standards.

This is despite hefty share- price falls from some of the index's larger constituents ­ Air New Zealand (once a top-10 company), Tranz Rail, Tower, Trans Tasman Properties, and Fletcher Challenge Forests.

The fund faces a potential problem with the exchange's avowed intention to do away with the NZSE40 ­ and, presumably, the Mid Cap Capital Index ­ at some point to give its new NZSE50 index more breathing space.

ABN Amro Craigs no doubt has plans to accommodate this.

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