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Profe$$or

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Profe$$or

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Monday, 12/10/2007 11:04:07 PM

Monday, December 10, 2007 11:04:07 PM

Post# of 137481
Index Additions

Mutual funds that track major stock indexes have to buy any new stock added to an index in order to keep pace and follow its investment guidelines. The larger the market capitalization of the company added to the index, the more shares the funds need to buy. The increased buying pressure on stocks added to indexes tends to drive their prices up, and this trend creates a great trading opportunity.

The stock may or may not begin to move on the day the index addition is announced, but it generally starts to move up in earnest one to two weeks before the addition actually takes place. Once the stock enters the index, its price tends to fall as traders take profits.

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