Unweighted Index
Categories: Index Funds
In most groups, some people are at least notionally more important than others. If General Custer says, "I don't think the Sioux look that tough...let's charge," then the army is going to, um...charge. A lonely sergeant could disagree, but his vote doesn't count much (or at all). Custer's opinion gets more weight.
That's how most stock indexes work as well. They are made up of shares from multiple companies, but each one doesn't have the same influence. The indexes are weighted (commonly by price or by market cap), so that moves by some of the stocks have a greater impact than others.
Unweighted indexes are the opposite. Each index component has the same influence on the overall movement of the index as all the others. No difference. In these cases, the army would take a vote on whether to charge or not. Very democratic.
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