Fat Wallet regulars know that index-tracking products are at the heart of our investment philosophy. Even Simon, with his individual shares and trading accounts, prefers having at least half of his portfolio invested in exchange-traded funds (ETFs). ETFs are financial products that track the performance of an index. If you struggle to understand what an index is, you’ll probably find ETFs difficult to grasp.
In the last Fat Wallet episode, we decided to create our own index to illustrate how indices are put together. Zack Bezuidenhoudt from S&P Dow Jones Indices graciously agreed to help us put together an index of Fat Wallet listeners’ favourite companies. The rules of the index were entirely made up by me. I was drunk with power.
We received 22 submissions between Monday and Wednesday morning. Since some listeners liked the same companies, we decided to give more weighting to companies that received more nominations. We are therefore happy to announce the world’s first index weighted by love. Probably.
We capped the exposure of each company at 10% to avoid over-exposure to an individual share. We also opted for a variation on an equal-weighted index. The result is an index as diverse and colourful as the Fat Wallet audience.
You can have a look at the complete working document here. And finally, below for your viewing pleasure, is the Fat Wallet Love Index, organised by weighting.
Kris