Fundamental Indexing

Fundamental Indexing

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Fundamental Indexing

Fundamental Indexing definition:  Fundamental indexing is an investment strategy that blends tenets of both active and passive management styles.  The index is defined based on various stock fundamentals (such as earnings or book value), rather than traditional market-cap weighted indexes. Under this philosophy, companies that are overvalued grow to be large portions of market cap-weighted indexes, and the passive investor loses when corrections in valuation occur.  Fundamental index investors do not analyze individual companies but instead periodically rebalance to an index defined by stock fundamentals.

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