

What causes an INDEX funds price to fluctuate? - Apane

Is it the buying and selling of the fund itself that causes the funds price to fluctuate?<p>Or, is it the underlying investments&#x2F;holdings of the fund and their prices that ultimately cause the funds price to fluctuate?<p>Cheers!
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obayesshelton
From what I know which could be wrong the price fluctuates based on the
performance of the constituents in that fund.

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Apane
Thanks! That makes sense.

Edit: Looked into this further and I can verify that you're right here. The
price of an index is determined by the price movements of the underlying
shares. Demand factors on the index fund play no role

Simply put, the indexes use either a price weightings, or a market
capitalisation weighing. Which are like weighted averages.

With market cap weighting index, a small movement in the share price of an
indexes underlying underlying share with a large market cap, will give more
say than a large movement in share price of a share with a small market cap.
The price method works the same way, except giving weightings towards market
prices rather than market caps

The Dow uses price weighting, while most other indexes use market cap
weighting. And the cap method truly speaking makes more sense.

