Fundamental Indexing Gets Top Marks

Fundamental indexing is still pretty controversial in the investment world. But the early results have earned top marks from our ratings model.

Unlike typical indices, which weight constituent stocks according to their market capitalization, fundamental indices weight their holdings according to criteria such as the size of their dividends.

TheStreet.com Ratings initiated coverage of 41 exchange-traded funds and four closed-end funds that accrued a sufficient track record one year's worth of risk and performance data by the end of November.

Sixteen of the ETFs that began trading in October 2006 received our top rating of excellent, with five being awarded the top rating of A-plus. Of these, four are members of the WisdomTree family of fundamentally weighted ETFs. All four track international market sectors, including communications, utilities, oil and non-cyclical consumer stocks. ...