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To: Cosmo Daisey who wrote (726)	1/1/1999 2:46:00 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 41369

>>>The index funds need to return the results of the index but they don't have to hold all the stocks in the index or the exact percent that makes up the index. Cosmo, I had the same impression until it was dispelled by someone who posted this paragraph from the charter of vfinx, the largest Index fund at $65B: The fund seeks to provide investment results that correspond to the price and yield performance of publicly-traded common stocks, as represented by the Standard & Poor's 500 Composite Stock Price Index. It attempts to duplicate the investment performance of the S&P Index by owning all of the 500 stocks contained in the Index, appropriately weighted. Happy 1999, Frank btw, my wife I saw the movie, "You've Got Mail" last night, and it was a marvellous advertisement for AOL. I think they're missing a good bet though; they should be passing out aol CD's after every showing.

To: Cosmo Daisey who wrote (726)	1/1/1999 2:56:00 PM
From: RocketMan	Read Replies (1) \| Respond to of 41369

So Cosmo, are you saying that while most funds underperform, these sneaky index FMs know how to beat the index, but are promoting indexing to the great unwashed, while secretly beating the index to line their own pockets? Heck, they probably don't even own any S&P's, they are probably into Dogs of the Dow, right? :-) Hey, and maybe the underperforming FMs are really indexing and pocketing the difference. Say it ain't so, Cosmo! Seriously, I didn't know they could guarantee index returns while trying to beat the index. Makes sense, but also sounds like a risky strategy, and one that could easily be abused. If the fund were large enough, for example, it could attempt to beat down the index in a way that favored their own holdings. And if their selection underperformed regularly, the company to take a real bath, when they could instead have hired an underpaid accountant to match the index. I just checked the Vanguard Index 500 prospectus and although they have a few loopholes in there, such as "trying" to match the index as closely as possible, they do give an example in which they would be 5% invested in a company that made up 5% of the index.