Stratified Sampling Question

Why is stratified sampling preferred if you have a lower AUM? I don’t really understand this point

With lower AUM, you often can’t physically afford to purchase every security in the entire index. So you are using what “few” assets you have to create a representative portfolio of the index.

That’s like if a Robinhood investor with $100 is spending $80 in transaction costs trying to create his own little index tracking the biggest 10 S&P companies by market cap. It’s not cost efficient.

didnt realize it was that straightforward, lol

thought there was more to it. Thanks.

No fees on Robinhood!

No fees but they are a for-profit company so how do you think they make money? By selling your trading information and orderflow to HFT’s who act on that info for profit. You are not the customer of Robinhood, the HFT’s are.