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Not necessarily. The index fund is supposed to track the index. It doesn't need to actually buy the exact stocks as the index, though in the case of the S&P 500
by xapata 11y ago
Not necessarily. The index fund is supposed to track the index. It doesn't need to actually buy the exact stocks as the index, though in the case of the S&P 500, that might be the easiest strategy.
- whatok 11y agoUh, it's not only the easiest strategy but the only purpose the ETF exists. If people thought SPY had drifted from its benchmark, no one would use it.
- lis 11y agoETF still have different replication strategies. To the customer they guarantee to track the index, however they might buy completely unrelated stocks or options to achieve this. The replication strategy should be an important factor when buying an ETF.
- whatok 11y agoI agree with what you're saying but I was talking about the SPY example listed above. The prospectus [0] for SPY says that it's not actively managed and that it rebalances at least monthly. [0] https://www.spdrs.com/library-content/public/SPDR_500%20TRUST_PROSPECTUS.pdf https://www.spdrs.com/library-content/public/SPDR_500%20TRUS...
- jonknee 11y agoYes, and SPY is the monster ETF that it is because there is no funny business and it tracks the index the old fashioned way by actually holding the securities. Broker dealers can trade in a basket of securities for new shares of SPY and vice versa which keeps it very close to perfectly tracking the index.
- xapata 11y agoSPY isn't the only S&P 500 index fund.