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*All market data delayed at least 20 minutes |
What is the MarketGrader Index
Started as a model portfolio for our clients, the 40-stock MarketGrader Index is a
selection of the best companies in our system every quarter. All selections are made
entirely by our system without any human input, eliminating the possibility of any conflicts of interest
or biases. All stocks are selected based on the strength of their fundamentals and on the
basis of sound portfolio diversification (see index rules). We therefore like to call it a
merit-based index.
Index Rules
The MarketGrader Index is an equal-weighted price index. Equal weighted means that all 40 selections are
assigned the same weight (same dollar value) at the beginning of each quarter in which the index is
rebalanced. A price index only takes into account the increases or decreases in the prices of the
index components when calculating performance; it does not take into account the reinvestment of dividends.
The index is rebalanced quarterly (not calendar quarters) in order to ensure only the best companies
remain in the portfolio. Rebalancings take place on the third week of February, May, August and November,
time at which the majority of companies in our system have reported their latest quarterly results.
Not all companies are replaced every quarter; the portfolio's historical average quarterly turnover
(the number of stocks replaced every quarter) is about 50%. However, if a company maintains high enough
grades to remain among the top forty and meets all other index criteria, there is no limit to the amount
of time it can spend on the index.
A few additional rules ensure the index is structured as a sound portfolio, diversified across market capitalizations and across industries:
- All stocks must have a market capitalization above $100 million
- At least 10 stocks must have a market capitalization above $10 billion
- No more than 10 stocks may have a market capitalization below $1 billion
- All stocks must have at least a three month average daily traded value of $2 million
- No more than 30% of the selections may belong to the same economic sector
- No more than 15% of the selections may belong to the same sub-industry
- All selections must have met their most recent earnings consensus estimate
- No REITs or Utilities are selected to the index
The complete Index Rules are available to MarketGrader.com subscribers.
Index Performance
The MarketGrader Index was first published in May 2003. Since then, daily, monthly, quarterly and
annual results have been published on our website. The performance of each of the index selections
has been published daily to our subscribers only. In order to determine the effectiveness of the
MarketGrader Index, we conducted a five year back-test covering the period 1998-2002. In order to
rebuild the index historically, the entire MarketGrader.com system was recreated for the five year
period. This allowed us to determine the selections for each of the rebalance quarters in each of the
back-test years. Therefore, please keep in mind that some of the results we list here are based on
back-tested data. All results since May 2003 are actual published results.
MarketGrader average grade by index
| INDEX |
AVERAGE GRADE |
| Dow Jones Industrial Average | 60.220 |
| Nasdaq Composite Index | 42.850 |
| S&P 500 Index | 55.860 |
| MarketGrader Index | 77.300 |
| MarketGrader Universe | 45.320 |
*Average overall MarketGrader.com grade for major U.S. market indexes.Source: the company.
Performance
| |
MTD |
QTD |
YTD |
2007 |
| DOW |
-19.01 |
0.0 |
-43.07 |
6.43 |
| NASDAQ |
-23.52 |
0.0 |
-50.38 |
9.81 |
| S&P 500 |
-22.33 |
0.0 |
-48.76 |
3.53 |
| MG INDEX |
-29.85 |
0.0 |
-60.0 |
1.92 |
MG 40 Historical Performance
| PERFORMANCE |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
10Yr* |
| S&P 500 Index |
26.67 |
19.53 |
(10.14) |
(13.04) |
(23.37) |
26.38 |
8.99 |
3.00 |
13.62 |
3.53 |
51.31 |
| Dow Jones Ind. Avg. |
16.10 |
25.22 |
(6.18) |
(7.10) |
(16.76) |
25.32 |
3.15 |
(0.61) |
16.28 |
6.43 |
67.73 |
| Nasdaq Composite |
39.63 |
85.59 |
(39.29) |
(21.05) |
(31.53) |
50.01 |
8.59 |
1.37 |
9.52 |
9.81 |
68.90 |
| DJ Wilshire 5000 Index |
21.72 |
22.05 |
(11.85) |
(12.06) |
(22.08) |
29.44 |
10.85 |
4.57 |
13.75 |
3.94 |
58.67 |
| MarketGrader Index |
37.45 |
78.67 |
(4.94) |
2.82 |
(4.78) |
76.93 |
22.23 |
25.16 |
8.86 |
1.92 |
586.42 |
*As of Dec 31, 2007
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