Playing with My Own Index

I decided to make my own REIT index since it seems like a good way to get some more income and I wasn't really happy with my current options in that sector. The iShares ETF tracking the S&P TSX REIT index gets a lot of talk for a lot of things. One is for having very few securities, 12 reits and t-bills. The other is for having roughly 25% of it's funds in Riocan and what used to be about 15% in H&R, or about 40% in two securities. Granted, it's not the number of ticker symbols you have in your fund, it's really about what they represent. I can justify having a large position in Riocan simply because it's hard for me to think of a place I lived where they didn't have a very nice looking property nearby and they were always pretty much fully rented out. H&R is also another big name, though they don't proudly post their name on every property they own. In terms of spreading investment dollars amoungst sqft, the two of them do a fairly good job.
One critism that I don't hear all that often is that its holdings aren't adjusted to remove what may not be considered REITs anymore after the big "let's kill off the income trusts" tax change. There's some worry going on over whether or not things like senior's housing and hotels where much of the money comes from the services provided as opposed to the lending of the property. I would like to stick to what is definately going to still be considered a REIT afterwards and still an income trust/mutual fund investment trust.
So, why build my own index? Well, I'm not going to deny that fun is one of the reasons. Also, while those two REITs might spread money over large amounts of rental area, they do not spread money around different management styles, and acquisition philosophies. They're also still only two ticker symbols, so I should be able to reduce volitility with a larger basket. Granted in the bigger picture it's like saying that you don't feel the waves as much, but you're still stuck in the current. So in hopes of getting better returns, I started going about deciding how I'll setup my indext.
XRE is based off an index that uses market share weighting. I am interested in returns and it tends to be a bit of a pain to calculate total returns. Complexity is not something that I'm interested in, keeping things simple is one of the general philosophies of indexing. I decided on a simple scoring process involving yield plus a four year average growth rate. The general idea being if I had a two percent higher yield, I can simply reinvest the difference and wind up with two percent better growth rate, so the two are really interchangable, at least in a taxless world. Four years was kind of an arbitrary decision. The current year is included and counts as a full year even though it's not over, this advantages reits that don't wait till the end of the year to adjust distributions. It's a fudge I'm ok living with. Also many REITs are less than four years old. So I did a simple average of whatever the distribution growth rate was over the age of the REIT. Notably absent is any capital appreciation. I'm less concerned about capital appreciation than I am income. So I now have a MK1 Return Rated REIT index.
It's also getting late, so I'll stop now and leave this post nicely about what I did and follow up tomorrow with a post on what my spreadsheet suggests I do.