It is an index firm ….so the shareholding should mirror the...

It is an index firm ….so the shareholding should mirror the percentage that MSB makes up of the ASX200 index
It is basically automated
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AI Overview

An index fund mirrors an index by building a portfolio that closely resembles the index's composition, aiming to match its performance. This is achieved through either full replication (investing in all index constituents) or partial replication (investing in a representative sample).
Here's a more detailed explanation:
1. Index Replication:

• Full Replication: The fund buys shares in all the companies or assets included in the index.
• Partial Replication: The fund invests in a smaller group of securities that behave similarly to the index as a whole.

2. Mimicking the Index's Makeup:

• Weighting:
  Index funds invest in the same assets and use the same weights as the target index.
• Portfolio Composition:
  The fund's portfolio aims to mirror the index's holdings, both in terms of the specific securities and their respective proportions.

3. Examples:

• S&P 500:
  An index fund tracking the S&P 500 would buy shares of the 500 largest companies listed on the U.S. stock exchanges.
• Other Indices:
  Similarly, index funds exist for a wide range of indices, including those tracking specific sectors (e.g., technology, healthcare) or other asset classes (e.g., bonds).

4. How Index Funds Work:

• Passive Management:
  Index funds are passively managed, meaning they don't actively try to outperform the index.
• Tracking Error:
  While index funds aim to track the index's performance, they may not perfectly replicate it due to factors like trading costs and differences in portfolio composition.
• Tracking Error:
  This difference between the fund's returns and the index's returns is called tracking error.

5. Benefits of Index Funds:

• Low Cost:
  Index funds are generally less expensive than actively managed funds due to their passive management style.
• Diversification:
  They offer broad market exposure and diversification across various sectors and asset classes.
• Simplicity:
  Index funds are easy to understand and invest in, making them a good option for beginners