Jul 26 2008
Bogle’s Counter Argument to Fundamental Indexing
The Fundamental Index hypothesis has its critics and one is none other than John Bogle. While Bogle will concede cap-weighted indexes such as the S&P 500, as represented by VFINX, will allocate more money to over-priced stocks, he also contends that we do not have the foresight to determine which stocks fall into that category. Therefore, it is better to stick with low-priced cap-weighted index funds.
Paying higher fees for index funds constructed around fundamental principles of sales, cash flow, book value, and dividends is my primary concern. Is it possible to engineer a portfolio by over weighting mid-cap value and small-cap value through the use of inexpensive ETFs or index funds, thereby capturing the value tilt at lower cost?
Photograph: Elan Gallery & Gifts, West Linn, OR
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