Talk:Fundamentally based indexes

Page naming

"Fundamentally based indexes" is another name for "Fundamental Indexation" which receives much more Google hits. VivekVish 06:27, 23 January 2007 (UTC)

If that were the case, then the redirect would just be the wrong way around. But I don't see much evidence that

either has currency outside the Arnold/Research Affiliates. Will revisit this later. Pleclech 12:39, 23 January 2007 (UTC)

Terminology

Using fundamental factors to construct a portfolio is the very definition of active investing. Most people associate the term "Indexing" with passive investing, making "Fundamental Indexing", at best, a confusing term. In reality, this investment strategy is an actively managed portfolio of stocks. As such, that information should be provided in the first paragraph of its deifinition to avoid further confusion on the reader's part. —Preceding unsigned comment added by 68.174.149.255 (talk • contribs) 10:15, April 12, 2007

• Investopedia defines active investing as "an investment strategy involving ongoing buying and selling actions by the investor. Active investors purchase investments and continuously monitor their activity in order to exploit profitable conditions." Furthermore, there are numerous forms of active investing that do not involve fundamentals (technical analysis or "buying what you know" come to mind). Fundamental indexing involves a transparent, replicable index weighting based on readily available quantitative fundamental information. Using the word active management will be confusing since investors may think someone is managing where the funds go. By your definition, there is no such thing as an index, since every index uses some factor for inclusion (and furthermore experiences turnover). I'll leave your edits as is, but I'll bring in an outside voice to resolve this. May seem a bit early, but I'd say there's a 99% chance that we're not going to resolve this on our own. VivekVish 17:15, 12 April 2007 (UTC)
  • Hiya, I'm coming in as a third opinion (we can invite other editors too as necessary). In these kinds of situations where there's a dispute over a term, I find that it's usually best to refer to outside sources. thefreedictionary.com seems to confirm the definition of "Active Investing"[1] but I'm not sure how this applies to the description of "Fundamentally based index". What would be best in this case is if someone could provide a source which defines the term. --Elonka 19:21, 12 April 2007 (UTC)
    • Here's an interesting discussion on active vs. passive management. "Passive or index managers - the terms are often used interchangeably - make no forecasts of the stock market or the economy, and no effort to distinguish 'attractive' from 'unattractive' securities. Portfolio adjustments are made only in response to fundamental changes in the underlying universe of stocks--when CBS disappears in a merger with Westinghouse, for example, or a new company such as Google joins the ranks of large company stocks." This definition would seem to support my position. The only difference between capitalization and fundamental weighting is a definition of "large." Another discussion says the following: "Active management is the art of stock picking and market timing. Passive management refers to a buy-and-hold approach to money management. It can be applied to any asset class: big stocks, small stocks, value or growth, foreign or domestic can all be accessed by passive techniques." Again, fundamentally based indexes falls under the category of passive management since they do not involve stock picking or market timing and they buy and hold stocks only to rebalance based on changes in fundamentals as capitalization weighting rebalances for changes in capitalization (buying larger cap stocks and selling smaller cap stocks). I believe that User:68.174.149.255's definition of indexes does not even allow for the existence of indexes in reality, since there must be some selection and weighting criteria. VivekVish 02:41, 13 April 2007 (UTC)