Mike
Thanks for your thoughts.
Some Index Fund Musings
A huge pool of assets now sits with the S&P 500 Indexers. During a period where all of the sectors perform uniformly, the Indexers maintain their current stock weightings and use new funds to buy stocks appropriately weighted. However, when one sector (uh, for instance, NAZ 100 - NDX) strongly outperfoms the others, the Indexers are forced to reallocate the pool of assets, buying more of the hot sector (MSFT, INTC, CSCO, ORCL are part of OEX) by bleeding cash out of the other sectors, and devoting a larger portion of the new incoming dollars to the hot stocks. Making silly valuations astounding. A very large, blind, dumb force, hulking over the investment landscape.
When the hot sector starts to tank, the indexers are forced to open the floodgates. |
