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Zecco.com » General Investing » ETF & Mutual Fund Investing » UEM index rebalancing
Last post 07-09-2008, 11:18 AM by Bulldog. 2 replies.
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  •  07-04-2008, 1:04 PM 33009

    UEM index rebalancing

    Reply Quote
    I mentioned UEM (The Capital Markets Index ETF) in a previous post. On reflection, I am a bit unsure about the way this index is rebalanced.

    It appears that the three index components (Stocks, Bonds, Cash) are weighted according to their "actual share of the US Capital Markets".

    Now, to my thinking, this would mean buying more stocks when the stock market has increased, and selling when the market has decreased, and likewise for bonds and money market funds.

    Does this not constitute "buy high, sell low"? Surely the sensible way to allocate assets is to move money into shares when they are DOWN relative to bonds, rather than up?

    Or am I missing something really obvious?

    BD

  •  07-08-2008, 9:56 PM 33154 in reply to 33009

    Re: UEM index rebalancing

    Reply Quote
    On the contrary, you have realized something really obvious that many people miss! Give that man a kewpie doll.

  •  07-09-2008, 11:18 AM 33184 in reply to 33154

    Re: UEM index rebalancing

    Reply Quote
    Thanks for that, it's always nice to hear a reassuring voice. UEM duly deleted from my watch list. Guess the people never read Ben Graham before developing their patented rebalancing formula.

    BD
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