Comments on: John Bogle and Jeremy Siegel Debate Index Funds

By: Ben

Ben — Mon, 23 Apr 2007 00:36:53 +0000

Interesting, thanks for pointing this out Flexo. I’ve been a VFINX man for years but it’s always nice to hear alternative views, I’ll have to do more research on Siegel’s approach.

By: Khyron

Khyron — Sun, 22 Apr 2007 14:35:18 +0000

Its called fundamental indexing.

http://www.frontlinethoughts.com/article.asp?id=mwo061606

By: mapgirl

mapgirl — Wed, 18 Apr 2007 21:56:19 +0000

I’m a fan of both Bogle and Siegel, but I think I’m siding with both and leaning more towards Bogle. The reason being the close to Samerwriter’s reason, you can make any index you want and pick a stock to add to it. I am sure Dr. Siegel has sound financial reasoning to choose what he chooses, but an index can be pulled out of a hat. In fact, I could make a fund out of those picks and call it the MAPGIRL HAT100 INDEX FUND(TM), market it, and do reasonably ok compared to professional CFA’s.

So nobody steal my idea, ok?

By: MossySF

MossySF — Wed, 18 Apr 2007 18:26:38 +0000

The number of Microsofts is far outnumbered by the number of pets.com. What do the historic numbers show? “Compelling” growth stocks have underperformed value by a good 4% since 1920.

My strategy — 66% Bogle, 33% Siegel. Capture the overall market but then overweight in the segment that has historically (and perhaps fundamentally) outpeformed.

By: samerwriter

samerwriter — Wed, 18 Apr 2007 17:36:25 +0000

The problem with the proposed alternative indexing strategies is that they are even more arbitrary than market cap.

Market cap is an evaluation by the market of numerous factors. Including those proposed as the alternative index.

Siegel uses the overpriced Yahoo as an example of why capitalization-based indexing is a bad idea.

Dividend-based allocation would have missed out on the phenomenal growth of many tech companies (for example Microsoft) who, for most of their history paid no dividend (or a negligible dividend).

EPS will miss out on companies that the market determines have a compelling growth story.

Effectively what Siegel is doing is stock-picking. He doesn’t want YHOO in his index, so he invents an index that underweights YHOO. The market cap is the value that the market puts on the stock, and Siegel is trying to outsmart the market.

I think I’ll stick with Bogle.