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What causes an INDEX funds price to fluctuate?
Is it the buying and selling of the fund itself that causes the funds price to fluctuate?
Or, is it the underlying investments/holdings of the fund and their prices that ultimately cause the funds price to fluctuate?
Cheers!
- obayesshelton 13y agoFrom what I know which could be wrong the price fluctuates based on the performance of the constituents in that fund.
- Apane 13y agoThanks! That makes sense. Edit: Looked into this further and I can verify that you're right here. The price of an index is determined by the price movements of the underlying shares. Demand factors on the index fund play no role Simply put, the indexes use either a price weightings, or a market capitalisation weighing. Which are like weighted averages. With market cap weighting index, a small movement in the share price of an indexes underlying underlying share with a large market cap, will give more say than a large movement in share price of a share with a small market cap. The price method works the same way, except giving weightings towards market prices rather than market caps The Dow uses price weighting, while most other indexes use market cap weighting. And the cap method truly speaking makes more sense.