Testing the Mediatest

Looking to see if the uploader works.

Author:: Gail Griffin
Publish date:: Dec 23, 1998 6:06 PM EST

Here's a chance for active mutual fund managers to gain some ground on the indexers.

Tuesday's announcement by

Standard & Poors

that it would add

America Online

(AOL)

to its

S&P 500

index will surely cause a rash of trading in that stock Dec. 31. At the close that day, AOL will officially become listed. Index fund managers, who try to match the returns of the index as closely as possible, will want to get in as of that moment.

With AOL trading at an all-time high at one point today of $141, those managers will have to pay dearly to get it.

"Looks like they'll be buying it at the top," says David O'Leary, of

Alpha Equity Research

in Portsmouth, N.H.

Consider the mammoth, $70 billion

(VFINX) - Get Report

Vanguard Index 500 fund. With AOL set to comprise about 0.6% of the S&P 500's total $9.7 trillion market cap, the fund will need to match that weight in its portfolio. That works out to about $420 million worth of AOL stock that Gus Sauter, the

Vanguard Group's

human being behind the huge indexing machine, will need to buy.

Sauter says in order to match the returns of the index closely, he won't start buying AOL until about 1 p.m. on Dec. 31. At 138 1 /2, AOL's closing price today, that would translate into about 3 million shares of the stock for his portfolio.