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Strategies & Market Trends : Value Investing

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To: Night Trader who wrote (13911)	2/12/2002 11:03:59 PM
From: Don Earl	of 78676

Indexes such as the S&P and Russel constantly change. The main consideration for being included in the various indexes is market capitalization. Russel makes the adjustments once a year and S&P can make changes anytime. The result is it's almost impossible for the market cap of the indexes NOT to go up. It's about like cheating at solitaire, if you're loosing, just go through the down cards until you find a winner. It's the main reason fund managers almost never beat the performance of the index even if they match the index stock for stock. When a fund manager sells a looser and adds another issue at the top of the chart, the fund takes a loss. The index doesn't take a loss since all it really amounts to is a list of the currently best performing stocks and their prices. You should be able to find more information on how stocks are added and dropped at these sites: spglobal.com russell.com While on the topic of indexes, does anyone have a handy link to charts for the Wilshire 5000? It doesn't seem to be very popular with the media because it gives a fairly accurate picture of what the market is really doing without any room for the spin factor.

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