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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: Tom Tallant who wrote (21027)	6/9/1999 12:26:00 PM
From: Dr. Zax	Respond to of 41369

<< It is my understanding that index fund managers adjust their respective funds based on the money inflows for a given quarter.When they buy stocks it is based on the company's market cap.. That is...the higher the market cap, the more they will allocate to that stock. Someone correct me if I am wrong but I think that is the general idea. >> True mostly - When index fund managers buy into a stock (because an index buys into it) they buy so that it will have the same percentage weighting in their fund as it has in the index. The index weights its allocation based on market cap. But once the initial % is set, it is easy to keep it the same as market cap. If the index holds some % AOL and AOL goes up (doubles,triples, quadruple ;) who cares) the new % of AOL in the index will be higher. But so will the managers % AOL. Not only that because market cap is directly proportional to # shares and share value, the weighting formula will still work and there need be no transactions of shares buy or sell. The same works out for splits. Dr. Zax