Re:Coinbase Index Fund
by JumpCrisscross on Tuesday March 06, 2018 @06:30PM
(#16533095)
Pardon me, the construction is as transparent as something like this can be, i.e. generally, whatever their committee feels like. My qualm is with the word “balancing” which implies diversification as this term is used within portfolio theory. You can’t balance a book of correlated assets. (You can track them, which this index tries to do.)
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Rebalancing is the correct term of art here. The index reweights, the fund rebalances its holdings in order to track the new reweighted index. Source: traded a lot of index funds.
Also, based on the blog post, the fund (or the index managers, who are the same people here) would say they are rebalancing in your sense of the word too. They are adding diversification compared to a portfolio that just holds, say, bitcoin. Sure, it's not as diverse as one that also holds stocks and bonds and real estate, but nobody's perfect.