Fundamental indexing refers to ________.
A) investing in index stocks in proportion to the stock's fundamental value
B) investing in index stocks in proportion to the stock's market value
C) investing an equal dollar amount in index stocks
D) investing in an equal amount shares in each of the index stocks

Question

Quizplus · Accepted Answer

Fundamental indexing involves investing in index stocks based on their fundamental value, which is determined by metrics such as earnings, dividends, cash flow, and book value, rather than their market value. It aims to avoid overpriced and underpriced stocks, and offer better long-term returns compared to market-cap weighted index funds.

Fundamental Indexing Refers to ________