There are 2 ways you can do this;
1. Open IE, click on Favorites or any favorite within a folder from the menu item (the one usually located between View and Tools). From here your favorites list will have a drop down menu. Highlight/Select any favorite from the list, right click and select 'sort by name". Presto!
or
2. Open the Favorites list from the Start menu. Highlight/Select any favorite or any favorite within a folder, right click and select 'sort by name". Presto!
=====================================================================================
When you add new favourites to IE you need to regularly sort them into order or put them into folders. The way to sort them alphabetically is the same as above.
Some sites will have a name that is applicable to the site saved to favourites without the http protocol at the front of the address/name while others will have the http protocol before the site name.
i.e.
http://www.webshots.com/g/60/td-td.html (thats the way it is saved to favourites.
whereas this site
http://www.tomsterdam.com/insideOE5/faqs/
when saved as a favourite is saved as; Inside Outlook Express 5 FAQ
Now alphabetically H as in http comes before I for Inside Outlook........etc therefore I have sites that are in perfect alphabetical order up to H, then I have all the http sites in alphabetical order within that subgroup (a,b,c,)then the rest of the sites from there on in alphabetical order up to Y.
If I want it all perfectly in alphabetical order I can rename those that are listed as http addresses and then have them all in perfect alphabetical order. IE does do what you ask, it's just that sites are not in agreement in the way the page will be saved to your favourite folder.
It is also a good idea to group your favourites into folders, such as Banking, media, useful links etc, this keeps your favourites in order. You can sort into alphabetical order from within your folders as well. This can be done by clicking on Organize Favorites from the Favorites tab on top toolbar.
If you have a long list of favorites, you can configure Internet Explorer to only display those favorites that you have recently used instead of displaying all of them. This is also a good way of organizing your favorites list so it is more manageable. Those favorites that you use infrequently are still available by clicking a link. In other words, they are just hidden from view until you decide to make then unhidden.
To configure this feature in Internet Explorer:
Open Internet Explorer.
From the Tools menu, click Internet Options.
Select the Advanced tab.
Scroll through the available options and place a check beside the option to Enable Personalized Favorites Menu.
Click OK.
Now when you open Internet Explorer and click on your Favorites menu, only those Web sites that you have recently accessed will be displayed. The remaining favorites are accessible by clicking the down arrow.
