I've just (hypothetically) invested $1m in two market-cap-weighted global equities tracker funds: one large+mid-cap tracker and one small-cap tracker. Both are of an accumulation share class, and I balanced my investment by respective market caps.
I'm trying to understand the underlying theory and if/why I need to rebalance.
I think they should be insignificant, so I'm going to ignore: the indexing error of the global equity index by assuming it tracks the entire universe of publicly traded companies; tracking error of the funds; as well as tax & transaction costs.
By a back of napkin estimate I own approx 0.000001% of publicly-traded equities. i.e effectively 0.000001% of each and every publicly traded company. Is this right, and if I don't sell is this constant or does it grow? How is it affected by dividend income, share offerings/buybacks and companies entering/exiting stock markets? If I opted for the income share class rather than accumulation, would my 0.000001% stay constant or shrink?
Do I need to rebalance my allocation between the two funds to maintain their weighting by market-cap? Intuitively they'll be weighted by market-cap+income if I don't rebalance. But how does the relevancy of income reconcile with income and capital gains being perfect substitutes, tax and transaction costs aside?
Any links to relevant theories that help clarify this appreciated. Apologies if this isn't considered the right place for this sprawling question, but other answers here seemed more insightful than on other SE sites.