My Virtual Log Book

Felix Salmon is a blogger/writer with the Conde Nast Portfolio magazine. He wrote a blog entry yesterday about cap weighted funds which I think is a must read for anyone confused between cap weighted funds and fundamentally weighted funds. He quotes Joe Nocera “fundamentally weighted funds ain’t index funds, and they shouldn’t be viewed as a replacement for index funds”.

Where the cap-weighted crew have done magnificently well is that they’ve alighted on the S&P 500 as their chosen benchmark, and then decided that all investment decisions should be made with respect to it: they’re setting the terms of the debate.

For many investors a fundamentally-weighted fund might well suit their risk profile better than an S&P 500 index fund - or it might free up a bit more risk appetite to go exploring in places like emerging markets and commodities.

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