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The thought is that with index funds, you're invested in enough of the market that you don't have to pick winners and losers and you get rebalanced as well. It
by tcbawo 9y ago
The thought is that with index funds, you're invested in enough of the market that you don't have to pick winners and losers and you get rebalanced as well.
It would be interesting to study the market cap effect of going from #501 to #500 in the S&P ratings.
If you think the entire market is overbought, then they might not provide the best returns over the short term. However, most people are very bad at timing the market or picking the strongest companies that will thrive in a down market.
- ksherlock 9y agoThere S&P 500 is selected by a committee so there is no #501.
- tanderson92 9y agoTechnically there are 505 due to dual-share classes for 5 of the securities in the index.
- tcbawo 9y agoMy point is that there is probably a bump going in and a hit falling out. This wikipedia article (https://en.wikipedia.org/wiki/List_of_S%26P_500_companies https://en.wikipedia.org/wiki/List_of_S%26P_500_companies) shows the additions and removals. I am curious about the distortive effects of demand from the S&P 500 as a proxy for the effects of passive investing.