Role of an Index Provider

When it comes to the custom index, then there are certain things that must be clear to you from the core. Index maintenance plays a very vital role in the indices scenario. The role that an index provider plays here is elementary. There are many conventional things that an index provider is expected to fulfill. Here we will focus on the role of an index provider.

It is as follows:

1. Index provider bears the responsibility of compiling the statistics that has a relation with different asset divisions, industry as well as securities. He thereby provides the investors with the measure to quantify and know which of the asset or market is performing well.
2. Index providers make available the enhanced and different methods so as to describe the variety of indices. This enable investors to actively participate in a rational manner in the market.
3. With the help of the assembled Portfolios you can evaluate the performance of the indices in question. You can then go in for purchasing the bulk of securities instead of going in for an individual one. This way you get to achieve your target in a diversified investment.
4. Index providers keep an eagle eye on their indices so as to make sure that any changes that happen are able to cope with the methodologies. An apt response for one who has a specific index is changing the compositions of the portfolio.

All in all, these are the basic things that the index provider fulfills. There are various types of index provider in the market. To name a few are the MSCI and S&P DOW JONES INDICES. MSCI has been around for 40 years and has rightfully existed in the market. It is one of the global leader due to the improved methodologies they pursue. It follows always an alternative approach. In addition to this, S&P DOW JONES INDICES is again a world leader. It provides diverse investment portfolios and benchmark in the indices. Besides, there are many others in the market. The role of an index provider remains inevitable here.

Source : https://thematicindex.jimdo.com/2017/10/16/role-of-an-index-provider/

Insight into the Index Calculation

Index is a value that is used to figure out the alteration in the price change of its relevant constitute within a period. However, it is difficult for the Index Company to handle the host of numerals as it is hectic and weighing causing inefficiency. Thus there arise an urgency for one value. To know the concept of Index Development you need to have an insight into the Index Calculation. This article intends to inform you the handy formula that you can use so as to calculate the index value. Here is a little insight into the Index Calculation.

Index divisor is just a simple point for the varying values of constituents that provides an initial point to begin the calculations. With the help of this you can get an initial value by a simple division. Most of the time it is taken to be constant which changes only on addition of securities or due to actions of the corporate including the adjustment of share. If you have the index divisor in hand it becomes easy to calculate the daily cap-weighted index value.

The formula for Index Calculation is as follows:

Index value = Σ (market cap of securities) / index divisor

This is the elementary formula for the final index value calculation. For using this formula you need to know the value of market cap of securities as well as the value of the index divisor. In order to calculate the index divisor, you have another formula.

In order to calculate the index divisor you can use the following formula:

 Index divisor = total market value/ index value

So now when you know both the values you can easily calculate the Index value.

All in all, Index divisors do not solve just this purpose but has a lot more to offer. This lets you know the impact of a security price change on the total index. So, I guess the article was helpful to you as it gave you the exact way to compute the index value without having to follow a much confused way.

Source : https://thematicindex.tumblr.com/post/166349888659/insight-into-the-index-calculation

Importance of Dividend Index in Portfolio

Total Return Indices study has a lot to tell about the performance of the company. However, there is a lot more that the Thematic Investing has to add to the market study. Here we tend to focus on the Importance of Dividend Index in Portfolio.

1. Dividend Index provide help to reserve for the investors the purchasing power of the capital. Over the period of time, the companies engaged in payment of Dividend Index have given investors an annual return greater than the inflationary rate.
2. Dividends provide benefits when it comes to tax payment. Certain dividends face a tax of around 15%.
3. It is a direct insight into the standing of the company in the market that too with precision. The sound reason being that it provides the ongoing as well as the regular feedback regarding the performance of the company in the market.
4. Dividend payments leave no scope for any company to manipulate their standing in the market. This provides a way for the growth that too on the fair basis.
5. Dividend payments and the dividend payout ratio both are immensely important to analyse the performance of the company. Higher the dividend payout ratios greater the stability a company has indicating better future growth.
6. Companies that tend to pay the dividend index are better survivals during the adversities as compared to the counterparts.
7. Volatility tends to get reduced with the Dividends. Other things like Stock prices change constantly but this changes only one time in a year which tends to reflect how the company actually performs. This precision provides a help in the long run and better growth opportunities.
8. Dividends play a very vital role in the total investment return as these tends to contribute more than the mergers and acquisitions. In total returns a major share goes to it.

All in all this is the Importance of Dividend Index in Portfolio. Not only does it reveal the performance of the company in the market but at the same time helps you to have a true picture in front of you.

Source : http://thematicindex.beep.com/