A method for designing a portfolio to replicate an index. The index is divided into cells, each representing a different characteristic of the index, the most common of which are (1) duration, (2) coupon, (3) maturity, (4) market sectors (Treasury, corporate, mortgage-backed), (5) credit rating, (6) call factors, and (7) sinking fund features. The latter two are particularly important because the call and sinking fund features affect the issue’s performance. The objective is to select from all the issues in the index one or more in each cell that can be used to represent the entire cell. The dollar amount purchased of the issues from each cell will be based on the percentage of the index's market value that the cell represents. The number of cells that the indexer uses will depend on the dollar amount of the portfolio to be indexed.