When and why would you rebalance the benchmark portfolio?
AIG, C, and GM were all in the Dow in early 2008. Need I say more?
and hence had to remove (or on the verge of removing) from Dow.
or better said- think of a price weighted index. you add the value of each stock’s px and divide by # of stocks in the index. so what happens when you have google in your index and citigroup? stocks with the higher price carry more weight and influence the index more. so it’d make sense every now and again to rebalance a benchmark because let’s say it’s a price weighted index and all tech stocks have moved up. then techs in this index might be moving it far more than financials, or whatever your benchmark orignally was trying to track.