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If an index fund wants to maintain the same portfolio percentage of GME when GME’s stock price rises, wouldn’t the fund sell GME, rather than buy?
by tashmahalic 6y ago
If an index fund wants to maintain the same portfolio percentage of GME when GME’s stock price rises, wouldn’t the fund sell GME, rather than buy?
- reducesuffering 6y agoIsn't it actually neither buy nor sell? Most common indices (by AUM) are market-cap weighted. If a total market ETF contains 0.25% of it in GME, and GME doubles in value, it's GME it holds is now 0.50%, and that's how much it should hold now, according to market-cap weight. No buying or selling. Of course there's many ETF's that aren't market-cap weighted, but the majority of funds/value is.
- boatsie 6y agoThat’s right, I misspoke. It could possibly require other funds that were tracking, say, the top 1000 stocks by market cap to buy, not ones tracking the regular index.
- kozd 6y agoNot if it's a cap-weighted index fund.