Fundamental wins over cap weighted indexing, demonstrates Rob Arnott

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Rob Arnott, chairman of Research Affiliates, which is famous for bringing fundamental indexing to the investment world, on why this method is superior to traditional cap weighted indexing. His contrarian method which ‘sells whatever is most newly beloved and buys whatever is most newly feared and loathed’ is gaining admirers. He says it delivers 2-3 per cent value add in the developed markets and 3-4 per cent in small companies and emerging markets.

[My firm, Plexus Asset Management, is the South African licence holder for the Research Affiliates Fundamental Indexing (RAFI) over here, and we are seeing very significant outperformance vs the market cap equivalent indices. Do contact me if you want to access the Johannesburg Stock Exchange by means of RAFI technology.]

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Rob Arnott, chairman of Research Affiliates, which is famous for bringing fundamental indexing to the investment world, on why this method is superior to traditional cap weighted indexing. His contrarian method which ‘sells whatever is most newly beloved and buys whatever is most newly feared and loathed’ is gaining admirers. He says it delivers 2-3 per cent value add in the developed markets and 3-4 per cent in small companies and emerging markets.

Source, Financial Times, May 25, 2011.

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