Can A Fundamental Indexes, ETFs Calm A Bear? It Depends
By Tom Lydon on November 20, 2008 | More Posts By Tom Lydon | Author's Website
Is there anything an exchange traded fund (ETF) investor can do in a down market such as this besides grin and bear it?
Investment strategies such as stock picking and bond investing are all in the red, so why not a fundamentally weighted indexed ETF?
Ron DeLegge for ETF Guide says fundamentally weighted ETFs try to beat the performance of a traditional index by selecting and weighting stocks according to various financial metrics such as earnings, dividends or book value. A traditional index such as the S&P 500 uses a market-cap weighted approach.
DeLegge points out that, so far, the performance has revealed a mixed bag: large-cap fundamental indexes are underperforming, while small- and mid-caps are slightly outperforming. Among sector funds, the performance also remains mixed.
When you choose a fundamental index there are two things to consider: 1) how it selects securities, and 2) how the securities are weighted.
Always be sure to understand what strategy your ETF follows. As we always say: know what you own.
Year-to-date, the S&P 500 is down 41.5%. In comparison:
- PowerShares FTSE RAFI Consumer Goods (PRFG), down 39.7% year-to-date

- PowerShares FTSE RAFI 1000 (PRF), down 44.3% year-to-date

Ron Paul Thinks That Fed “Oversight Is Laughable”
S&P 500 Index Is Still Overvalued
This Small Oil Exploration Company Is Ripe For A Takeover… Here’s How To Profit
Obama Commits To Free Trade Agreement With South Korea, But Auto Trade Remains An Obstacle
Exponential Growth, Finite World
Bay Street Stocks Slip Slightly Again - Canadian Commentary - 1 day ago
Stocks Close Mostly Lower Amid Disappointing Quarterly Results - U.S. Commentary - 1 day ago
Bay Street Stocks Linger Slightly Below Unchanged Level - Canadian Commentary - 1 day ago
Stocks Remain Stuck In The Red In Mid-Afternoon Trading - U.S Commentary - 1 day ago
European Markets Fall, Led By Banks, Oils - European Commentary - 1 day ago


