When fundamental index funds began appearing in 2006, proponents had high hopes. Rob Arnott, chairman of Research Affiliates, said that fundamental indexing represented a better mousetrap, a system for outperforming the S&P 500 and other standard benchmarks. How have the funds done so far? While it is too soon to make final judgments, the early results are promising. Many funds have performed as Arnott hoped, surpassing competitors by wide margins.Among the top performers is Schwab Fundamental U.S. Small Mid Company Index (SFSNX), which tracks a RAFI benchmark, an index designed by Research Affiliates. During the past three years, the Schwab fund has returned 1.7% annually, outdoing the Russell 2000 small-cap benchmark by 4 percentage points. Other RAFI funds with strong records include Schwab Fundamental U.S. Large Company (SFLNX) and Schwab Fundamental International Large Company (SFNNX).
Fundamental Index Funds Beating Traditional Benchmarks
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