There’s More to the Indexing Life Than Just the S & P 500

One of the key misconceptions about indexing is that it’s all centered on the Standard & Poor’s 500. Though S&P; 500 funds dominate, they’re not the only game in town.

Among the alternatives:

* Vanguard, TIAA-CREF and a few other firms offer funds pegged to key bond market indicators, such as the Lehman Bros. aggregate bond index, or components of them. A low-cost indexing approach can make a huge difference in the bond arena, where returns tend to cluster together.

* Stock fund investors reluctant to count on the S&P; 500’s perpetual dominance have been turning to so-called total market index funds. Offered by companies such as Vanguard, T. Rowe Price and Fidelity, these funds allow investors to bet on virtually all actively traded U.S. stocks. They’re typically pegged to the Wilshire 5,000, which encompasses all companies on the New York and American stock exchanges and Nasdaq.

* Other index funds are more aggressive than S&P; 500 portfolios. Rydex Nova leverages the S&P; 500 to capture a greater performance than the benchmark--in other words, it goes up more when the S&P; rises but down more when the S&P; falls. Another Rydex fund, the OTC portfolio, tracks the Nasdaq 100, a technology-heavy index that catapulted 85% last year. And Vanguard Small Capitalization, which tracks the Russell 2,000 index of smaller stocks, is likely to fluctuate more than the S&P; 500 over time, as small-cap stocks are known to gyrate.

* Exchange-traded “Spider” portfolios allow investors to bet on subgroups of the S&P; 500, as well as the index itself. Some of these groups, such as the S&P; tech stocks, can be expected to bounce around more than the broad yardstick itself.

* Various international index funds, especially those pegged to emerging markets indexes, are also on the riskier side.