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It also involves rebalancing the weights of each stock to account for stock splits, dividends, and change in market capitalization or the float number (the amou
by mruts 8y ago
It also involves rebalancing the weights of each stock to account for stock splits, dividends, and change in market capitalization or the float number (the amount of shares on the public markets).
- kgwgk 8y ago> It also involves rebalancing the weights of each stock to account for stock splits, No. > dividends, No. > and change in market capitalization No (at least for the changes related to price movements and not share count). > or the float number (the amount of shares on the public markets). The last one is the only valid concern. In the end turnover is quite low (a few percentage points per year, including additions/removals and adjustments, if I remember correctly).
- mruts 8y agohttps://en.wikipedia.org/wiki/S%26P_500_Index#Index_maintenance https://en.wikipedia.org/wiki/S%26P_500_Index#Index_maintena... I guess I was wrong about the splits, but everything else still holds.
- kgwgk 8y agoRegular dividends are not on that list (only "special" dividends result in adjustments). And market cap changes are only relevant as far as the "change in outstanding shares" is concerned, which is not usually the main driver for market cap changes.
- mruts 8y agoThe problems for an index are a little different than an ETF following an index. If you have to allocate capital behind the index, you have to do some more adjustments and the expense ratio is going to reflect that.