John Redwood: Why index trackers take a very active view

Funds run winners without taking profits

As the FTSE reshuffle this week told a tale of our times, index investing involves sticking with the winners.

An equity index is a moving portrait of the economic health and direction of a nation or economic area. Each quarter, the compilers of main indices of the world make changes to their Index composition. The FTSE 100 in the UK holds the 100 largest UK-quoted companies. The S&P 500 holds the 500 largest US names. At the quarter, end out go the less successful companies whose market values have been falling, and in come replacements whose share prices and market values have been rising. This time the changes to the FTSE 100 index removed three companies damaged by the Covid-19 crash, a...