New Complexity with New Indexes
Last week, Mike wrote a compelling post about index investing, specifically the complexities and volatility. I thought that was timely after reading the news that Russell Investments and a partner were creating 24 new indexes based on the Fundamental index methodology. This method uses adjusted sales, operating cash flow and dividends plus buybacks instead of market capitalization for weighting securities within an index. It’s a really interesting approach and seems to have numerous merits.
I’m not the right person to discuss the merits of one approach versus the other. This different approach brought a thought to mind: we should evaluate and scrutinize any backwards looking data closely. I have some first-hand experience with that. … [read more]