Fundamental indexing when prices are rich and 6 stocks generate 98% of 2018 S&P 500 gains

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by Daendrew

98% of S&P 500 gains come from just 6 companies.

When you take that into account, it is even more impressive that SFLNX, the Schwab Fundamental US Large Company Index Fund has held up the way it did vs S&P 500 and Russell 1000 as the fundamental indexes have significantly less exposure to these high flyers.

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The PE multiple is closer to historical levels with the Fundamental Index at 16 times earnings vs 22 times income for the total market.

Would it be prudent to put a percentage of equities into fundamentally weighted indexes? There is much more room to grow at 16x than 22x multiples.

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There is a Persian proverb that states when you sleep on the floor you don’t fall out of bed. If there is a correction of 25-50% would fundamentally indexing help lessen the blow?


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