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Yes, so you should not allocate the $400 equally across the shares to match the performance of the index. You should buy an equal number of shares of each stock
by ptype 10y ago
Yes, so you should not allocate the $400 equally across the shares to match the performance of the index. You should buy an equal number of shares of each stock. It may not be a greatly constructed index by modern standards but to my understanding you can in theory get the same performance yourself.
- brudgers 10y agoBuying an equal number of shares does not track the DJIA either. Apple closed at 126.6 the day it replaced ATT. ATT closed at 33.48.
- ptype 10y agoI struggle to see why that is a problem? You will need to rebalance the portfolio, yes.
- brudgers 10y agoThe DJIA replaced each share of ATT with a share of Apple on a ledger. Without additional investment or buying and selling other assets, there's no way to replicate that in a portfolio due to the difference in share price. Essentially, the DJIA pumped in an ~300% increase in equity value on the ATT shares...or divided among thirty companies a 10% profit.