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>Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitabil
by lowdest 5y ago
>Yes for the common retail person sure, but someone has to purchase stocks to put them into an index. Those are professionals who evaluate PE ratios, profitability, and financial statements.
This is not what an index is. You are describing a fund, but an index fund explicitly does not evaluate PE ratios, profitability, and financial statements, they buy everything in the index according to the market cap. Some proprietary indices are privately curated in the way you describe, but in common use the "index" means all of the companies, rather than a curated subset.
- mbesto 5y ago> they buy everything in the index according to the market cap You're splitting hairs. I guess I should have clarified. What I meant was that at some level the companies are being valued based on PE ratios, etc. So while the index funds may not be analyzing the underlying securities themselves (other than determining their weighted value), someone is, such that their market cap drives them being in the index (SP500 for example). Point still stands from the parent comment.
- deleted 5y ago[deleted]