Revisiting Fundamental Index Funds

I have a weakness for fundamental indexes.

No, I don’t own any…at least not yet. But philosophically, I agree with their premise.

Recently, I wrote a Globe and Mail article about them, and based on Canadian-listed comparisons, they stacked up well.

More recently, writing for Assetbuilder, I compared them again using products available on the New York Stock Exchange. This time the results were mixed.

To read more, check out my latest Assetbuilder article





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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10 Responses

  1. Barry says:

    Hi Andrew

    Do these studies only compare the one index itself (cap vs fundamental), or the one index (cap vs fundamental) plus dividends, and how do they compare over that period to your 3 fund portfolio (including or sans dividends wherever the earlier comparisons) and rebalancing?

    What is the difference between a Fundamental Weighted Index and a Value Weighted Index and are they/could they be better propositions than a Market Capitalisation Weighted Index?

    Depending on which is better, how can an average investor on an average wage take advantage?

    Regards

    Barry

  2. AJ says:

    Right now I use http://www.mutualfundstore.com/ for my mutual fund. Which is better, Index or ETF?

  3. Travis says:

    I was wondering if it would be wise to purchase an EFT, since I’m still in school and the majority of money is paying for tuition, and do not want to put the 3,000 dollar minimum into an index yet if it means not paying off school in full like I’m doing and staying student loan free. I was just wondering if people add money to ETF’s monthly or if that is not efficient with fees + taxes. I was thinking about doing the dollar amount strategy mentioned in your book (same dollar amount= more shares at a lower price and less at a higher price) My goal was to eventually have enough in the EFT to transfer some to total stock indexes while still in college. Trying to follow one of your rules about starting early.

    Thanks in advance

    • Hi Travis,

      You could certainly buy some ETFs to get the ball rolling. But if you are still paying for school, focus the vast majority of your energy and funds on paying that off. Once you have done so, your ETF account will be sitting there, ready for you.

      Andrew

      • Travis says:

        Thank you for the response, the information and everything you are doing with your book and this website. I just made my first investment into the Vanguard total market eft (VTI). Thanks again.
        On another side note, monday i went to the bank to cash in savings bonds my uncle gave me for christmas every year. I was going to use this money, which ended up to be 1100 dollars, to fund my EFT. Something small to get the ball rolling. The teller was finished and called me to a cubicle. She handed me my deposit slip with my account balance on it. I am 20, go to school full time, live at home, and have worked in a factory 50-60 hours a week for 2 years. I have no bills so all my money is saved for the university i plan on attending. She sat me down and asked “Have you ever thought about doing something with this money, we offer some great options that will grow your money.” I could not help but laugh. I was not trying to be mean it was just exactly how you described it in your book, trying to push their funds. She was lucky I had to be somewhere or I would have gave her a lesson on investing. I just said I’m all set have a nice day.

        • Great story Travis! It is too bad you had to leave. You may have been able to give her a gentle lesson. I’m thrilled to hear you have learned it at such a young age.

          Cheers,
          Andrew

  4. Jerry says:

    I see links for purchasing your original book. Is there a way to order your forthcoming book?

    • Hi Jerry,

      Thanks for your interest. The manuscript has been submitted and I believe the book will be ready by November. If you work for an organization able to order 50 or more copies, let me know, and I can arrange a 40% discount off the retail price. A couple of thousand orders have already been placed by international school administrators who have ordered copies for their staff. Very cool.

      Cheers,
      Andrew

  5. valferdinandcaro says:

    After all the years, did fundamental indices really beaten traditional indices?

  6. Chris says:

    I was thinking about starting a portfolio with hybrid mix of the Couch Potato portfolio and the Fundamental portfolio strategies. As a British expat in their early 30’s, I was thinking about 20% IGLS, 20% VUKE, 20%PSRU and 40% VWRL. Do you foresee any problems with including the fundamental PSRU ETF with the other cap-weighted ETFs or do you think it might be a nice way to further diversify a portfolio?

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