The Big Three Indexing Giants

The largest providers own most of the indexing market: Vanguard, Blackrock, and State Street –  The Big Three.

How do these funds operate? They simply buy every stock in their designated index in proportion to the company’s size (the technical term is the float-adjusted market capitalization), the most popular of which is the S&P 500.

The Big Three do not do any research on these purchases before they buy or as they hold. They buy and hold regardless of whether a company makes more money, less money, or even loses money.

To see the dominance of The Big Three, search for the ownership data of any S&P 500 company – say Apple, and those 3 names generally own about 20% of the shares outstanding:

However, this was not the case before the previous decade.

Next Page – The Indexing Vault