Stock market indices change more than you might imagine – despite their iconic image
The well-known Dow Jones Index consists of a select group of just 30 companies. General Electric (GE) – was a founder member of the Dow Jones Index in 1896. Until late June, GE had been a continuous Index member for over 110 years, but it has now been replaced by Walgreen Boots Alliance, a pharmaceutical retailer. As is often the case with index demotions, GE had gone through a hard time and its share price fell by almost half in 2017.
In the same month that GE and the Dow Jones Index parted company, MSCI, another leading index provider, made some important announcements and changes. The MSCI Emerging Markets Index (EMI) is a key yardstick for measuring emerging market performance; about $1,900 billion of money either tracks or is benchmarked against the MSCI EMI.
In June, a first round of Chinese mainland shares (A shares) were added to the EMI, and more will be included later this year. Then further adjustments to the EMI are scheduled for 2019:
■ Saudi Arabia will be added, with a weighting of approximately 2.6% of the Index.
■ Argentina will return to the Index. It was a member of the EMI until 2009, when it was demoted to the Frontier Market index in the wake of a financial crisis in the country
FTSE Russell undertook its quarterly review of the FTSE 100 Index in June. This failed to produce one widely predicted change – the replacement of the High Street retailer Marks & Spencer (M&S) by the online only grocer, Ocado. Ocado did enter the FTSE 100, but M&S survived for another three months.
Whether you hold index-tracking funds or active funds which try to beat their benchmark index, June’s changes are a reminder that indices are by no means fixed.
Let us know if you would like to discuss your investments in light of these changes.
The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
Are you in the top 10%?
In May, HMRC released data about the top 10% of income earners.
The top tenth of income earners is projected to be anyone with an income of at least £57,500 in 2018/19. HMRC estimates that this 10% will pay about £110 billion of income tax, just under 60% of the total for 2018/19, compared to £81 billion and 53.5% in 2010/11.
The statistics reinforce the feeling of many higher earners that they are paying a growing share of tax. Above inflation increases in the personal allowance have been matched by frozen, or barely moving, thresholds at the other end of the tax scale.
If you want to cut your tax bill, the HMRC statistics suggest you should seek professional advice, not wait for the Chancellor.
The Financial Conduct Authority does not regulate tax advice.
Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances.
For specialist tax advice please refer to an accountant or tax specialist