Of fundamental indexing Sauter says among other things;
Why does anyone think it's simple to come up with a formula that's going to be able to add a return above the market when active managers haven't been able to?While he has a point, WisdomTree has back tested their domestic funds back to 1964 and, well, the results are better than cap weighting. There are plenty of caveats to be sure but 40 years may not be a fluke.
It seems to me that people in the market cap weighting business could be in a bit of a pickle. First, what are they supposed to say about fundamental indexing? "Um, yeah, we think our way is inferior."
For the individual investor none of this matters. You have the luxury of having all sorts of methodologies in your account without having to be loyal to any of them. I would imagine that for some things, market cap weighting is better but for others you should probably use a fundamentally weighted product, if you use these things at all.
It is not intuitive to me that investing methods can't evolve which is my take on what the market cap crowd is saying. Yesterday I posited that the newer commodity ETFs might be a better way to go than the older ETFs (just a theory with no conclusion). In the last 35 years or so we have seen the options market, the Nasdaq and I believe most of the futures markets all created. So, again, the idea that things always stay the same is upside down.
As an administrative note, I had said I wanted to put labels on all of the past posts but there are over 2100 of them that I would have to do and I also think it screws up the various syndication feeds. We'll see how it goes.