The components of each of our indexes are selected based on our overall fundamental grade (0-100), with only the highest graded companies making the selection as long as all other index rules are met. Therefore following each rebalance every index is assured of having the most fundamentally sound companies in each selection category, such as the highest graded small caps or highest graded technology stocks. We therefore like to think of our index selection process as a meritocracy where only the companies with the best numbers make it. Coupled with the fact that none of our grades and ratings are subjective or based on any person’s opinion, our index methodology is truly transparent.

Given that the goal of our fundamental research is finding the companies that are regularly creating true economic value, which usually translates into lasting shareholder value, it is only natural that all index components be given the same opportunity to contribute to the portfolio's overall performance. Therefore when selected all components are equally-weighted in each of our indexes, regardless of the company's size. These weights, which change during the course of every quarterly or semi-annual index period, are again adjusted to an equal weight on every rebalance date. This methodology is unlike that of traditional market-cap weighted indexes, which give the biggest companies by market cap the biggest weight in the portfolio, giving them an outsized amount of influence on overall performance.

Our automated index selection process uses a series of sector, industry and market cap filters to ensure each portfolio is well diversified and not too heavily weighted toward any one particular group of stocks. In the case of our Core indexes, our selection process limits the number of stocks per sector or Industry that can be included in the portfolio. It also limits the number of small cap stocks and ensures a minimum number of large cap stocks are selected each period. In the case of our Market Cap indexes obviously only the sector filters are applied and in the case of the Sector indexes only the market cap requirements apply. The result is a series of well-balanced portfolios.

Perhaps as important as the other three attributes of our indexes combined, our indexes’ strict rebalance schedule adds an element of discipline that many investors simply lack. All indexes are rebalanced quarterly (MG 40, Sectors) or semi-annually (MG 100, MG 200, Market Cap) on specific dates always known in advance. First, this forces the portfolio to take gains in stocks that have performed well in the period and have therefore seen their portfolio weight increase. Second, it forces the portfolio to cut losses early in stocks that have underperformed as a result of deteriorating fundamentals, as these are replaced by higher graded ones. And third, it ensures that every index is always made up of only the best companies.