How would I create an index for a portfolio of stocks?
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I want to create an index for about 50 stocks in a portfolio to track their performance. I want the index to be similiat to the S&P 500 so that it will account for stock splits and other factors.
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Answer:
In a spread sheet maybe you could multiply the stock price by the outstanding shares then divide by the total. But that would give you an index that is weighted by market cap. Or you could just add up all the stock prices and divide by 50. Then if one split you would have to add an adjust factor to that particular stock as in for a 2 for 1 split that would be stock price times 2. That would result in stocks with higher prices having a greater influence. Or in a stock tracking portfolio where you can enter dollar amounts just put in the same $1,000 starting value for each stock making your index start at $50,000 then track the ups and downs. That would let you see how the individual stocks perform with the individual values at any time. The last one certainly is easiest and they would do the split adjustments for you I think. I doubt any stocks are splitting any time soon. Maybe a reverse split with these low prices.
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