It’s been a highly bifurcated market with energy, agriculture and materials on fire and financials and healthcare in the dumps. Not much hope for a good return with a market weighted index fund in this very difficult market.

Read the discussion here -

http://www.bogleheads.org/forum/viewtopic.php?t=19447&highlight=arnott 

Paul 

Hi Geoff:

"the underlying arguments against market cap weighting are very compelling."

Interesting first post on the Vanguard forum . .

Best wishes.
Taylor

Taylor,

This is not Geoff's first post at Vanguard.

I have found Geoff's previous posts polite, helpful, and astute.  He has  been very upfront about his specific interests.

I always look forward to hearing Geoff's views.  They contribute to an ongoing dialogue I know I benefit from.

By the way, from time to time Rob Arnott publishes some nice pieces in the Financial Times.  Bob U.

Geoff is an intelligent poster who has written informative and insightful posts in the past.  As Paul suggests, there have been excellent discussions of fundamental indexing on Bogleheads.  It may be that Geoff has been banned on Bogleheads so now he can only post here.  Is that right Geoff? 

Taylor, the underlying tone of your post is the very reason I don't frequent here much anymore.

You Bobbleheads need to stick with your own forum 

Taylor Larimore:

Hi Geoff:

"the underlying arguments against market cap weighting are very compelling."

Interesting first post on the Vanguard forum . .

Best wishes.
Taylor

Geoff's first post on the Vanguard Diehards was 12/20/2006.

Greg
 

twinlabs:

Taylor, the underlying tone of your post is the very reason I don't frequent here much anymore.

You Bobbleheads need to stick with your own forum 

Oh, for Pete's sakes, get over it already.

 Take a look at the name of this thread, and the subject of your own post!

 Sheesh.

quantext:

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:

Thanks for the recommendation.

I have read most of the books on the Diehards reading list.  I realized that the books on that list can broadly be divided in to two categories:  Those that favor TSM, and those that favor slicing and dicing.

I am on the look out for books that present an alternate viewpoint, but which advocate low-cost, low-turnover investing.  They are hard to find.

I recently bought Jones' "Intelligent Portfolio".  I read your review on it, and realized you were not a fan of the book.  Nonetheless, I was interested in reading a book which favors a growth-tilted portfolio.

I agree that a "cogent-argument" is worth reading, even if you disagree with it.

Thanks.

Petrocelli

Hey Drip,

Look at Petrocelli's post. THAT is the respectful way to respond to a person's post challenging the forum "norm" 

twinlabs:

THAT is the respectful way to respond to a person's post challenging the forum "norm"

twinlabs:

You Bobbleheads need to stick with your own forum 

This is an interesting thread that touches on many of the core issue of fundamental indexing.  My conclusions are the following:

1) Market cap weighting (as in the S&P500 and most other major indices) is an abritrary construct.

2) In attempting to fix this, Arnott ends up with a value tilt to his portfolios

A bigger theme, however, relates to another point that several reponses to my post have raised.  Energy, commodities, REIT's, utilities, and a range of other asset classes have been crucial to the conctruction of portfolios that have weathered the last decade.  Market cap weighted equity portfolios mixed with bonds have not cut it. 

The strict market efficiency model that leads