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Suppose I have invested in ETF VOO. This Vanguard ETF tracks the S&P 500.

If a stock such as Goodyear (GT) that is contained in the S&P500 gets removed and replaced with another stock such as Bitcoin (BTC) - does VOO incur a net loss? If so, who foots the bill?

Are the incoming and outgoing stocks usually around the same price? Is the incoming one usually a tiny bit higher (since the outgoing one is probably trending downwards), resulting in the net loss?

And is this net loss part of the expense ratio? I would have thought the tiny expense ratio wouldn't cover what could be a significant net loss.

Sridhar Sarnobat
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1 Answers1

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The NAV of an ETF changes because of the share price of its components. It's actual price increases or decreases because buying or selling of ETF shares in the marketplace.

If a stock is removed from the index that the ETF tracks, the portfolio composition changes. The ETF rebalances and realigns the weightings of its assets. While this may incur additional commissions, it doesn't cause losses to the ETF's NAV.

Bob Baerker
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