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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (2929)	12/27/1998 6:40:00 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 99985

James, is this not the ^DOT ?. Zeev

To: James F. Hopkins who wrote (2929)	12/27/1998 6:51:00 PM
From: Follies	Read Replies (2) \| Respond to of 99985

Jim, I was confused for a while and had to work it out on a spreadsheet but I think I understand the confusion and there may be a problem in your interpretation. First, the simple logic of my argument. Assume you had EXACTLY 1% of the total market cap of the index. You could buy exactly 1% of the shares in each of the companies regardless of price and end up with 1% of the market cap index. Regardless of how the prices change you would always own 1% of the shares and hence 1% of the marketcap. You would not have to rebalance. Second, the flaw in your logic is that your are assuming that you are investing the same dollar amount each day. If you had invested the money the day before , you would not have the same dollar amount to invest today, it would be more or less depending on the movement of the index (i.e. its components). If you use that adjusted amount, you would see you have to buy the same amount of shares of each company. Dale