Hi all:

I am a big fan of John Bogle and there is no doubt that most retail investors would do better if they just invested in a few Vanguard funds.  That said, Mr. Bogle's strict adherence and insistence on the primacy of market-cap weighted indices has bothered me for quite some time. 

Market cap weighted indices make sense only if markets are truly efficient.  I think that Rob Arnott does a better job of presenting all of the evidence against market cap weighting in his new book, The Fundamental Index.  This is a very readable summary that is presented in terms of expert analysis and basic common sense. 

Mr. Bogle is highly critical of 'fundamental indexing.'  He points out--and fairly so--that a fundamental index is actually a mechanical active strategy--he is correct.  That said, arguing over what is an index and what is not seems like semantics to me.  I do not buy (literally or figuratively) the fundamental index but the underlying arguments against market cap weighting are very compelling. 

I am not going to provide a review of the arguments in The Fundamental Index at this time, but this book should be required reading as a counter-point for Bogleheads IMHO.  You may reject the whole thing, but it is worth seeing a cogent argument like this. 

I thought that Arnott's book would be just a sales piece for his fundamental index.  It is that--but it is also a highly intelligent argument on a wide range of fronts. 

Now, there is certainly an argument for confirmation bias here but the last decade or so seems like a pretty fair case for why market cap weighting may not be efficient.

Geoff