RAFI™ Fundamental Index™

RAFI Fundamental Index is built on the principles of contrarian investing and disciplined rebalancing.

JULY 2015

 

Fundamentals of the Fundamental Index


 

The Fundamental Index strategy—now boasting a 10-year track record of actual results—has transformed equity investing in the United States and around the world. See and hear how it works and why it might be a sensible choice for your portfolio.​​

At a Glance


 

Breaking the link between price and weight

Embedding a buy-low, sell-high approach

Thoughtfully designed and highly implementable

RAFI™ Fundamental Index™ is built on the principles of contrarian investing and disciplined rebalancing.

Traditional passive investment vehicles are market-capitalization weighted, which means that as the price of a security increases, so does its weight in your portfolio. This results in overweights to the most overvalued companies and underweights to the most undervalued companies.

RAFI Fundamental Index is a non-price-weighted index strategy that aims to deliver excess return versus the cap-weighted benchmark by using fundamental measures of company size to systematically rebalance against the market's constantly shifting expectations.

Thoughtfully designed to deliver for investors

Breaks the link between price and weight
Using fundamental measures of company size to sever the link between price (market capitalization) and portfolio weight, RAFI Fundamental Index strategies avoid significant overweights to the trendy, popular, and most expensive securities.

Engages in contrarian rebalancing
RAFI Fundamental Index strategies utilize a systematic rebalancing process that embeds a buy-low, sell-high approach within the index strategy. Using a company's fundamental weight as a rebalancing anchor, the Fundamental Index approach systematically rebalances out of securities whose prices have increased, while rebalancing into securities whose prices have fallen and have more attractive relative equity valuations.

Benefits the investor
A systematic, fully transparent approach that preserves all the benefits of traditional passive investing: broadly diversified, low cost, and high investment capacity.


 

Strategies

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