When an index goes in for a bit of dental work. Also, a way to structure an equity index.
An index is a way of tracking the performance of a group of stocks. Think: the S&P 500, the Dow Industrial Average, etc.
Most indices are weighted in some way. Which means that some securities get more emphasis than others. The index doesn't just consist of one share of every stock. Some stocks have more influence...they're more heavily weighted in an index. Typically, this weighting is done by either price or market capitalization.
In a capped index, there's a limit to how much weighting any one stock can have. Even if it gets way ahead of the others in either price or market cap, the stock can't rise above a set weight within the index.
The goal here is to make sure that the index doesn't become overly dependant on any one stock. At that point, it ceases to be a useful tracker of the group and essentially becomes a proxy for the one stock. You might as well skip the middleman and just watch the price of the one stock.
It's like a band where the lead singer gets too famous and eventually the band has to break up. A capped index ensures that the Rolling Stones stay the Rolling Stones, and don't become...Mick Jagger and the Jaggerettes.
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Finance: What is an Omnibus Account?110 Views
Finance a la shmoop. What is an omnibus account?
Herbi just eats leaves, Carni just eats meat, Omni well it's pretty much [Different buses eating stuff]
everything. So yeah an omnibus as in bus-i-ness or business account services is
a bunch of investors who've all pitched in or wired in their capital to become a
percentage owner of that omnibus account. Why would people do this? Scale, volume,
discounts size, heft. When you have a lot of money in an account basic things like [Lots of money in a suitcase]
audit and legal fees and brokerage services and the fees with them and
other one-off costs get amortized across a lot of people in dollars invested [Definition of Amortization]
rather than being laid entirely or solely on one investor where they can
then be a meaningful percentage of the total and with an omnibus account you [Bus labelled Omni eating leaves]
also get anonymity since it's a broker dealing in street name with the account [Anonymity stamp]
interfacing with the street well investors can live if they want in the
lovely dark shadows of Erewhon. Omnibus accounts are sort of like your own [Full moon in a dark sky]
custom mutual fund without the whole nav, net asset value stamp requirements at
the end of each trading day and all the other regulations and filings and legal
crap needed for publicly offered securities it's like having a fully [Book labelled my very own omnibus account]
gassed up bus with a working GPS and Waze system you can drive anywhere you [Guy sat on a bus]
want on the investing landscape you don't have to tell anyone outside of
your own partners about it, and it works great as long as you all want to eat the
same kind of financial cooking.. [Omni asking Carni if he is going to finish his food]
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