Re:Half of US stock fund assets are now invested in index funds
by dagw on Tuesday May 28, 2019 @03:33AM
(#20028007)
Index fund must balance their portfolio.
They must balance to the underlying index, not so that they hold the same value of each stock. If A goes down and B goes up they don't have to do anything unless the change is so dramatic that it causes the people who compile the index to update which stocks are in the index.
What can happen is that a stock being added/removed from a major index can cause a large amount of buying/selling by index funds as they are 'forced' to add or remove that stock in their portfolio. However that is a fairly rare occurrence.
They must balance to the underlying index, not so that they hold the same value of each stock. If A goes down and B goes up they don't have to do anything unless the change is so dramatic that it causes the people who compile the index to update which stocks are in the index.
What can happen is that a stock being added/removed from a major index can cause a large amount of buying/selling by index funds as they are 'forced' to add or remove that stock in their portfolio. However that is a fairly rare occurrence.