Is there a better way for investors to index their portfolios?
A bitter fight is breaking out over just that question.
In one corner sits John Bogle, founder of the Vanguard Group. He believes that index funds should hold stocks in proportion to each stock’s market capitalization – the market value of all the company’s shares.
In the opposite corner sits Rob Arnott, who co-authored The Fundamental Index: A Better Way To Invest, with Jason Hsu and John West. They believe that indexes should ignore market caps and hold companies in proportion to each firm’s fundamentals – things like cash flow or book value.
The spat between Mr. Bogle and Mr. Arnott may sound like an academic debate, but the outcome could have a large effect on your portfolio results.