Index Provider Roles and Responsibilities

Index provider aims to compile statistics related to various asset classes, industries and securities to provide the investors with meant to quantify objectively and to compare asset classes and various market performance on an ongoing basis. Index providers actively monitor their indices to ensure that changes are made to reflect using index value. The Index company task is to connect the start ups and align the corporate brands and those interested to invest collectively. Indices are administered, maintained and index calculated by Index providers and used to provide a representation of particular market segment or index objective.

Index providers should follow following good practices as explained below:

• Governance

An Index provider should have good governance arrangements with clearly defined management structure and appropriate allocation of authority and responsibility. Index provider should continuously act in compliance with the latest practices of the industry. An index provider should regularly conduct training for staff on the relevant policies and procedures in relation to its index operation.

• Quality and transparency of Index methodology

An index provider should have made it public index methodology for indices that are intended for commercial use and should review index methodology time to time to maintain appropriate calculations and should ideally document these methodologies for each of its indices. Also index provider should consider feedback received from subscribers, data contributors and other market participants in the review of its index methodologies in connection with index calculation.

• Quality and Transparency of data collection

An index provider should take appropriate steps to utilize reliable sources of data and shall maintain clearly defined policies and processes for collecting, evaluating and utilizing relevant data in connection with index calculation.

• Index Calculation and verification

An index provider should ensure that its indices are calculated in accordance with its methodologies with established policies and procedures.

• Timely Publication

An Index provider shall ensure that information about its indices is published or otherwise made available in timely and appropriate manner.

• Conflicts of interest

An index provider should take appropriate steps to identify and address conflicts of interest arising in connection with index calculation and maintenance.

Source : http://agriculturetrindex.webstarts.com/blog/post/index-provider-roles-and-responsibilities

Measuring Investment Performance Accurately

A total return Indices accurately measures the performance of the index. It gives investor actual idea of the return on investment that he takes home.

The high Dividend index serves as benchmark for income seeking equity investors. The index seeks to measure the performance of high yield companies. This index contains group of companies who investors believes that it pays higher dividend.

A Smart beta is an investment strategy designed in a way to add value strategically choosing, weighing and rebalancing the index containing companies that is based on the investor’s objective factors. Smart Beta strategy opens the horizons of the investments option available to particular investors and it should be quantitatively and objectively evaluated based on the objectives of the investor and the duration of the time for which he has invested and seeking returns on it.

The index fund purpose is to mirror the activities or growth of the index that functions as its benchmark. A total return index takes into account not just the price returns of the stocks but also dividends paid out on the stocks. It serves primarily as benchmark for comparing fund performance. The total return also includes interest, capital gains, dividends, distributions realized over a period of time as a matter of fact.

The calculations of the index returns are on the basis of the interval on two different point of time. The very first step is to calculate the price level of the index on the first and last day of the trading period you are evaluating.

Total return indices reflect the total earning of the investor in totality. It gives actual earning of the investor what they will take home. It also becomes relatively easy for the investor to clearly depict the benefits or return on investment.

Total return indices are basic tool of an investment manager to ascertain performance of the components of the group supposing that all other cash distribution is reinvested altogether. Total return indices are therefore being a totality in itself as it includes dividends, interests, rights offerings and other distribution realized over a period of time which is a most accurate measure of the performance.

Source : http://agriculturetrindex.blog.fc2.com/blog-entry-7.html

Ascertaining Performance of Investment by Index Calculation

An index is a group of securities chosen to track a particular investment theme market, industry or sector etc. The primary goal of index is to ascertain the risk or return profile of that theme without necessarily holding every security even if that may qualify. Index calculation is basically being representation value to track the investment theme value. Market sectors are huge having enormous hundreds and thousands of securities, therefore its becomes too time-consuming and expensive that is reason for Index development.

The exact compilation of securities in an index is known as basket, while the proportion of the index each particular security is called as its weighing. An index’s value is a single number that, when compared to its starting value, depicts how the index has performed over time. Having a basket of securities available, Index maintenance service allows investment managers to define the eligibility criteria of the products and effectively use security composition and weights resulting from the index/investment portfolio rebalancing. When set up correctly, investment require little maintenance.

An index is comprised of only those securities in the basket that are most relevant to the investment theme which helps market participants to follow market trends without having to track the other enormous amount of available securities.

Benefits to market participants utilizing Index Calculation:

• Market Performance: Index calculation help an investor assess a given market performance of the investment easily. It can let investor objectively measure market performance by helping ascertain risk /return profile.
• To gauge how effectively current active strategy is working. It lets investment manager performance of the securities compilation in the basket.
• Index calculation of index value also serves as the foundation for other investment products like mutual funds or other like Exchange Traded Funds(ETF)
• Index calculation of Index value evaluates a market risk profile or its diversification benefit. It helps evaluate various kinds of securities present in the basket it risk /return on the investment.

This index calculation of index value is very important in monitor the changes in prices of it constituents over time and we can clearly compare our returns on the investment.

Source : https://agriculturetrindex.quora.com/Ascertaining-Performance-of-Investment-by-Index-Calculation

Latest Tool for Investment: Thematic Investing

Thematic investing is a broad term that encompasses top down investment approach with a focus on broader macroeconomic theme that investor sets his faith. Thematic investment is forward looking future–oriented investment approach where investors invests based on the theme he sets his belief on the technology, trends and advancement that are going to rock the financial markets in the future.

Thematic investing is the term particularly used in the equity investing. It is top down investing that involves looking at overall picture of the economy and analyzing the stocks of specific companies that resonates well with the belief system of an investor may be in terms of its policies, products etc. While searching for appropriate funds, index services can be useful with wide range of opportunity available for thematic investing. A stock equity index can be used by investors and financial managers to describe the market and to compare the return on specific investment. Thus, helps in choosing appropriate funds that can choose for high return on investment.

Thematic Funds are equity mutual funds that invest in stocks based on a particular theme varying across different sectors not focused on one single sector. It basically invests in sectors that is commonly woven around a single theme that investors believe will give high return in future and future ready varying from being multi sector, international exposure, export oriented and rural India etc.

Thematic investing is the approach of taking advantage of future trends offering wide range of opportunities available for funds and utilizing index services enable a person to up to date with latest investment portfolio information on thematic investment. It capitalizes on long term trends speeded across economic and geographic boundaries recognizing the fact of fast changing pace of the world. It is more of your conviction or belief that you believe to be future oriented provides an alternative to the mainstream method of investment through mutual funds.

There are huge choices available to create a portfolio for you choosing funds identical with the themes that you are particularly interested. It certainly let you choose funds with requisite transparency and flexibility and with Thematic Investing now being accessible to all brackets

Source : http://agriculturetrindex.beep.com/latest-tool-for-investment-thematic-investing-2018-02-08.htm