A number of years ago, charts were made showing over the years the Stock Market Index climbed over the years, offering the advice if you bought stocks over the years they would be worth more than if you did not buy stocks. It was a lovely chart, what it did not tell you the most important aspect of the index was on a quarterly basis it dropped some “losers” and added “winners” which is the reason why the index was up on a long term basis. For us as individuals, it is harder to drop stocks, which is the reason most of us have at least one stock that you held onto longer than you were expecting to.

The S&P Dow Jones Indices typically does a rebalancing at the end of every quarter, in a press release the company is delaying the process to late June.

When the S&P rebalances it means all the index funds have to sell the “losers” and buy the “winners” to ensure their holdings agree with the S&P. The S&P Dow Jones Indices has a formula which determines who the winners and losers are and includes such information such as the number of shares available to shareholders, market capitalization as well as past performance.

Linking to dividend paying stocks, most dividend stocks are easily in the formula for the inclusion in the index which help on the long term capital gains aspect; the dividend being paid allows for shareholders to examine the dividend to see if it is sustainable and then hopefully continue to hold or do nothing. That can be a very good response.

There are more questions than answers, till the next time – to raising questions.