Creating An Index Advice

[cpatte7372]

Hello All,

Can someone let me know if my rudimentary approach to creating an index is any good.

At the moment I'm attempting to create a index comprising of real estate stocks, taken from CBSMarketWatch list of securities in the real estate industry. There is a list of over 400 stocks within the real estate industry, however esignal at the moment only allow users to list 200 symbols. Therefore, I have arbitrarily selected 150 stocks with a price between $20 - $70.

Can someone please let me know if thats a good/bad way to go about creating an index?

As always, I appreciate all comments.

Cheers

Carlton

[MR]

That is one way. Another way, include all the largest companies, or if interested in a specific region, make sure you have all the major players in that industry in your index, or if there is a strongest market, you could weigh them more heavily in your index portfolio? If interested in creating an index fairly representative of the industry nationally, include a representation of both large, medium and smaller players. Not sure, but do you include Canadian and Mexican, other foriegn ADR's (if any) if trying to create an index with a larger frame of reference. To what extent do you want or need to have more diversification in your index? Is your index for portfolio diversification of investment money, or is it just to help you guage the strength of weakness in the industry? Am just thinking out loud. It really depends on what you are trying to accomplish with the index. Another idea, is go look at some of the real estate indexes out there already and find out what they comprise. You should be able to do that if you go to their web sites. Maybe they could give you some good ideas.

[cpatte7372]

Thanks Marc,

That is excellent advice.


Cheers mate.

Carlton

[cpatte7372]

Marc,

I have another question. Lets say there are 200 stocks within, say chemical specailty ($DJUSCX). And lets say I download all the symbols in that index and watch them during the trading day. If there is, say 190 of those stocks within $DJUSCX advancing what that not suggest that it be a good idea to hold/buy stock in that industry?

Cheers

Carlton.

P.S.

I hope I made sense.