Fundamental Indexing in the Real World
Earlier this week I discussed the promise of fundamental indexing. This strategy takes aim at the shortcomings of traditional cap-weighted indexes, which overweight growth stocks and are prone to bubb [...]
The Promise of Fundamental Indexing
Last Friday, I had the pleasure of attending a talk by Rob Arnott, the creator of the Research Affiliates Fundamental Indexes (RAFI). If you’re not familiar with fundamental indexing, here’s a primer. [...]
How to Track Down Tracking Error
How do you measure the performance of an index fund? That sounds like a simple question, but it’s one I think many investors still have trouble with. Otherwise I wouldn’t routinely get questions like, [...]
A Case Study in Currencies
In my last post, I explained that US-listed ETFs that hold overseas stocks do not expose Canadians to fluctuations in the US dollar. This is an important idea to understand if you’re comparing ETFs th [...]
Currency Hedging in International Funds
Currency hedging can be confusing for investors who use index funds and ETFs that hold foreign stocks or bonds. The basic idea, which I have written about before, is not terribly hard to understand. I [...]
Where Do Returns Come From?
You don’t need a lot of mathematical horsepower to be a Couch Potato investor. Indeed, simplicity is one of the strategy’s virtues: just keep your costs low, diversify widely, and stick to the plan. B [...]
The Making of a Couch Potato
I know very few people who began their investing lives as Couch Potatoes. Most started out in mutual funds or as stock pickers and, somewhere along the line, realized they were overpaying and underper [...]
Can Your Funds Outperform Over a Lifetime?
Advocates of active management admit that only a minority of mutual funds will outperform their benchmarks, but they argue there is still a significant probability of success. According to the data Ri [...]
Beating the Market Is a New Idea
Today we take it for granted that virtually all mutual funds and stock pickers are trying to earn higher returns than the overall market — or at least earn the same returns with lower risk. But Rick F [...]
A DRIP in the Bucket
One of the downsides of using ETFs—as opposed to index mutual funds—is that dividends and interest are not automatically reinvested. Instead, they are paid in cash, where they often sit idly in your b [...]
