Imagine getting an instant portfolio of 200 shares by buying only one stock with just one brokerage.

Sure would save a lot of trouble, not to mention expense, especially if you were getting the best or at least the biggest 200 companies anyway.

Instead of having to fret about buying or selling a particular stock, you could just go with the flow.

That's what the SPDR (nicknamed spider) S&P/ASX200 Fund does.

It trades on the ASX as STW and copies the ASX200 index lock, stock and barrel.

So you'll get some Telstra (5 per cent of the portfolio) but also some BHP Billiton (13 per cent). You could call it a glorified index fund only it trades on the ASX and the management costs are lower.

STW is known as an exchange traded fund or an ETF, not to be confused with an ETS, which is an emissions trading scheme and really is confusing.

While called a fund, for all intents and purposes it's a one-stop stock that gives you an instant portfolio of 200 stocks with no entry fee and an annual fee of 0.27 per cent.

The beauty is the fund also gives you an instant exit out of 200 stocks should the need arise again.

The downside of STW is that you have to take a view on the whole market, rather than a particular stock.

Is the market at fair value?

That's debatable. The dividend yield on the STW fund is barely 4 per cent and it's only partly franked.

The sharemarket's price-earnings ratio is 16, which is higher – and so dearer – than the historic norm of 15.

But take out the banks and the price-earnings ratio is below the norm, suggesting the non-banks might be cheap.

The trouble is STW gives you both, in which case dollar cost averaging – that is, buying in dribs and drabs – is probably the way to go.

It'll cost more in brokerage but removes the risk of jumping in at the wrong time.

Advantages

- Instant portfolio

- Easily traded

- Low fee

Disadvantages

- Index only

- Low dividend

- Getting pricey

Verdict

An easy way to get a portfolio or diversify but it can never out-perform, or under perform the overall market.