Several of the comments seem confused about why the process isn't entirely straightforward. Here's an example: Say I have $100 mn under management at an index

Several of the comments seem confused about why the process isn't entirely straightforward. Here's an example: Say I have $100 mn under management at an index fund. When the markets close on Thursday, I have a 5 mn weighting in Apple and its market capitalisation is equal to 5% of the S & P 500 index. On Friday morning, Tim Cooke makes an inspiring speech about the iCar and Apple's market cap rises to 8% of of the S & P index. I want to sell some of my other positions and buy Apple so that I still have a balanced weighting of S & P 500 shares. However, I face a tradeoff. If I do this in small bursts over the course of the day, I have a higher administrative burden. I also risk running up bigger transaction fees if Elon Musk makes another speech in the afternoon unveiling the Tesla-phone, forcing me to sell again after Apple falls back down to 5%. If I wait until 3.59 to place a massive sell order for all my other stocks and buy order for Apple, (a) market participants might think I know something about Apple, causing the price to rise yet further as I struggle to complete my order (b) sneaky traders could buy up Apple Stock at 3.55 and then sell to me at 3.59 for a higher price. This is the balancing act a passive fund manager faces. Edit: As comments point out, this example is incorrect. First example should say something like Apple splitting into Apple and iPhone and then the relative prices changing after the split. The second half still makes sense.