i thought indexing was supposed to be easy?

One of the strongest pieces of advice out there for retirement/financial planning is to invest in index funds. The rationale is backed by how, over the long term, something like 98% of actively managed funds underperform when compared to the index (usually the S&P 500 index). Actively managed funds are those where the fund managers often make decisions about what to buy, hold and sell based on some type of analysis/strategy. On the flip side, you have passively managed funds where a manager just follows some sort of index. This means there's not a whole lot of thinking needed, not a whole lot of need for buying/selling (aka turnover, which leads to high costs and taxes) and a simple rationale that plain ol' investors like me can actually understand.

Much of investing's nuances go way over my head and/or are so complex that I really have no interest in staying abreast of it that much. (If I was that interested in it, I wouldn't have quit my job at CIBC World Markets, after all.) Now, I just found out (via a New York Times article) about fundamental indexing. Which, again speaking as someone who likes easy-to-understand stuff, makes index investing more complicated.

For the purpose of providing background -- when index funds are discussed, its usually something like the Vanguard 500 (VFINX), which holds stocks in the S&P 500. The number of shares held in each company is weighted according to their market capitalizations -- the greater a company's "size" in the S&P 500 index, the greater its "size" in an index mutual fund. Pretty simple, right?

Fundamental indexing goes beyond the weighting of market caps to look at stuff like earnings, dividends, etc. First, let me say I don't necessarily think the concept is ill-conceived. I just think it complicates the simplicity of index investing with so-far unproven theories, and like some guy in the article said, it sounds more like active management of a fund than passive management.

I'll probably keep an eye out for information about this new tact as more come out (and you know the fund companies will be pushing the PR machine pretty hard), but I think I'll just stick to the vanilla flavor of index investing.