Stupid question of the day! | S&P 500 Index

CFA Level III Equities
#1

If the S&P 500 Index rose by 10.00% - if you were to buy 1 share of each of the 500 companies represented in the index, would you also receive an exact return of 10.00%?

Second question is what type of return would you receieve, are we talking about total return, i.e. price appreciation + divs?

Could anyone please enlighten me :slight_smile:

#2

Question 1:

No, you would expect to earn return that way if the index was equally weighted. The S&P 500 index is market cap weighted. You would be overweight the smaller caps and underweight the larger caps.

Question 2:

If you own the stock, you are entitled to the dividends paid. So that would be total return.

#3

  1. yes it’s an equal weight vs maarket cap question. dont forget there is also free float and s&p is commitee selected index.

  2. i thought s&p did not include dividends?

#4

I thought he was referring to a situation in which he was buying the stock. Owning the stock would be total return.

#5

thanks guys!