Will Lyons, This should answer all you questions on the VMC indexes.
1) How were the stock in the index picked?
I made the index up mostly from compiling people picks made on the value microcap board to make the index. There were certain criteria used, which I admit was somewhat subjective, but really the index is supposed to be a microcosm of the board picks. Below is the criteria.
VMC Index Criteria & Other thoughts:
A) All stocks here are microcaps.
B) These stocks have been accepted by the board as value, or were considered value in the beginning of the year.
C) Rate of Return was done by the sum of all the returns divided by the 100 issue here, To get an average return.
D) Although these are not all the stocks we talk about they are a nice size microcosm of our stock universe.
E) These stocks represent a broad range of sectors and give us a good idea how the value microcaps have performed.
2) What about the rebalanced Index?
Some people want a rebalanced index after several months went by, and then I obliged them with the rebalanced index. For the rebalanced index I present the data in dollar terms, because that really is the only way you can do it with multiple buy points. Stock that enter the rebalanced index, enter as similar to the one's that started in the old index, through a lot of board members talking about a stock, and it being seen as value by the numerous board members. The ones that are kicked out of the rebalanced index, either have went up too much and is currently out of value territory, company started reporting losses, which means they are no good, because to have value we need some earnings that is an important first requirement. And thirdly if the company is brought out I kick it out of the index, we are not arbitraigers here.
3) Are my decisions somewhat subjective to put stocks in and take stocks out? Why 100 stocks in the index?
First I will tell you as hard as I try unfortnetly there is some level of subjectivity and discretion that is used by myself, I wish I could eliminate subjectvity, but I've found it impossible. I choose a 100 stock, because it was a nice big number that gives you a big enough sample to track the boards picks, but doesn't accept every microcap in the world. I just felt is was the right amount of stocks to set the index up with.
4) When do we rebalance? When do we wipe the slate clean and start over again?
I theoretically can rebalance at the end of every month, when I feel deemed necessary. I didn't feel it to be deemed necessary in the month of july, but I will say I have already decided to rebalance in the month of August, which means next week there will be a rebalancing going on.
As For wiping the slate clean I will start over with both indexes next year, that does not mean a lot of the same stocks will be in the index again, because a lot of those 100 stocks will still reflect the boards picks. Each stock will be evaluated at the end of the year, and a new list will be provided in early January.
---I hope this answers your questions, and probably answers more then you wanted to know, but what can I say I love to be through. If you have any more questions I will try to answer them to the best of my ability.---