Stock Price Charts

Does a stock price index reflect the actual value of a market index based portfolio?

If I were to buy a portfolio of stocks of, say, $ 10,000, with the same composition and in the same proportions as the S&P500 and, after one year that index had a variation of, say, +15%, would my portfolio be worth exactly $11,500? If not, why?

Public Comments

1. No. There are transaction costs. So the difference would be the commissions on the 500 stocks that are in the s&p500, (which would be considerable since you're dividing 500 stocks into only $10,000)--remember there's a price for EACH trade. You'd be better off buying an ETF that replicated the S&P500 index so that you only pay the one commission for the trade. BUT you'd still always UNDERPERFORM the benchmark index because of the transaction costs and imbedded management fees.
2. Hi, I'll explain what I know. Index tracking mutual funds and etf's don't necessarily hold identical securities as the respective index. In addition, there is some subjectivity and the manager in many cases has room to add or mitigate risk. There is much more, I am sure, but this is just to give you an idea. Each Index fund should be investigated. Also, you might want to consider a company like Vanguard - the pioneer of index funds- they invest in a bigger "basket" of securities and offer broader diversification in their index funds. Fidelity is another company. Check out some reviews on these funds, if you like on Moneyrec.com-- you can also ask your question there and get some good input and suggestions from other users and some pros. Hope this helps. Best Regards, Grace
3. Well, you have to count the transaction costs of the trading. If you're asking this question, you really shouldn't be in stocks.