Each month, when I do the share performance round up, I point out that the FTSE indices are ‘weighted’. Ie the biggest companies (by market capitalisation) have the greatest effect. That’s why the FTSE Hardware Index has done so well this and last year – it is dominated by ARM which has had a spectacular run.
Same applies the other side of the pond. Today NASDAQ has announced that it is cutting Apple’s ‘weight’ in their index from 20.5% (yep, it was a fifth of the NASDAQ index!) to ‘just 12.3%.
In the olde Holway Report days we had our own SCS Index which was unweighted. Just included all the SCS stocks and averaged the share movements. Personally I think that’s a better way to do it. Afterall no one actually has a balanced portfolio (other than the Tracker Funds). The best performing stock of late in the Holway portfolio is Blinkx which, because of its size, isn’t even in the FTSE SCS Index.