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Index Rebalancing

Index Rebalancing

Parent term
Index

Index Re-balancing occurs when the makers of an index change the rules that define what securities or the actual securities make up an index

  • Rebalancing  can have an impact of ETFs and Mutal Funds that impact indexes
  • They may need to buy or sell securities to rebalance their holdings (results in lots of buying & selling)



Example (2018 S&P 500 index update)

  • In 2018 the S&P 500 index updated the 11 sectors that make up the index
  • Each stock in the index is assigned to a sector
  • Facebook and Google were removed from the "Information Technology" sector and moved to the "Communications Services" sector
  • The "Communications Services" sector replaced the previous "Telecommunications" sector


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