Jim's Nasdaq100 Special as a basket. Message Board

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Strategies & Market Trends : Jim's Nasdaq100 Special as a basket.

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To: James F. Hopkins who wrote (2068)	6/5/2006 4:27:54 PM
From: OldAIMGuy	Read Replies (1) of 2103

Hi Jim, Re: Weighted vs Unweighted..... I'm also amazed at the difference in performance. I'd read about the S&P500 a year or two ago and from that point on wondered why it is that the media spends so much time talking about the Weighted average. Explanation of why the Unweighted does better might be done by analogy. Imagine two mule trains. One's pulled by 5 to 10 very strong mules with 490 to 495 little ones also pulling. The very strong mules aren't very fast but the little ones are. Even so, the small ones can't budge the heavy load on the wagons. So the wagon train moves only as fast as the slowest of the big mules. The second mule train is pulled by 500 equally sized mules. Some are faster than others. Those that are faster actually have enough strength that they tend to pull the slower ones along with their extra effort. With the Weighted average if #450 in capitalization managed 25% growth, it barely shows up in the SPY since it represents maybe only 1/1000th or less of the index. #450 will have a much larger impact on RSP by comparison since it represents 1/500th of the index. Best regards, Tom

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