What should one look in an index provider
Having an index provider is very beneficial for one and one has to know more about it. Custom index and many other indexes are already there for one to go through different options. So one must know list of things one must see while they are looking for an index provider.
Index calculation considers many different parameters which makes the index valuable. But one must know these different things while they are looking in for an index provider.
- Objectivity - The benchmark construction of the index should be completely transparent and determined with complete purpose and objective.
- Accuracy - The index must be an accurate inflection of the market, one must remember that having complete accuracy is important, there shouldn't be any great difference in the outlook of the market and the index as that will be misleading for the people.
- Multifactor - one must see that the index provider considers multiple factors and then analyze accordingly. The growth and the current external factors must also play a key role in deriving the index.
- Timely and efficient construction - one must remember that the benchmarks rebalancing approach will be nothing but a reflection of the market changes. So the current and ongoing market changes are very important to be considered by the index provider to draw proper and accurate conclusion for their investors to know more.
Seeing these all criteria's does play a key role one must know that the index is having all these parameters behind them, make sure you know that these parameters are been considered by the index provider in a strict way while they were drawing the index.
If any of these parameters were manipulated by the provider then this makes the indicator absolutely negligible and not worth, one must know that these parameters are very important for one to analyze while they are making an investment in the market.
There are many index providers which work on these above mentioned factors only so spotting the correct index provider will not be an issue.
Source : https://sites.google.com/site/equitysindex/what-should-one-look-in-an-index-provider