Tancred

Rob Arnott's RAFI 1000 Fundamental Index -- Not An Index At All (ETF: PRF)

Taking the Fundamental Index at face value, it does not confine itself to investment alternatives limited to stocks, so I'm having some difficulty understanding a criticism that rests on an apparent assumption that's the entire universe of available investment alternatives.

To the extent one is "investing in the index", that is likewise no more than an investment strategy. Arnott is simply pointing out that ordinary indexed-weighted strategy will measurably underperform because it more favors investments showing recent outperformance rather than those possessing fundamental merit (which are not necessarily mutually exclusive).

Perhaps his greatest single argument is that the past is no guide to the future and that ordinary cap-weighted index investment tends to disregard that eternal truth.