how can an index fund also be a value fund?

[target2019]

When discussion includes a very broad term like index, I try to find an example or definition:

Index Investing

This article helps to answer the initial question:

Index Investing: What Is An Index?

Still, some can use the terms to suit their viewpoint or purpose.

Many around here will use index as short name for S&P500. The S&P500 can be divided into value or growth companies. You can go further in segmenting (as in sectors).

Since companies succeed and fail over time, the lineups change as companies rise and fall in ranking.

[ERD50]

Quote:

Originally Posted by mrWinter A couple articles I found interesting regarding some indexes, that unlike what I may have thought an index was, are not diversified and are not really all that passive: When Is A P/E Not A P/E: How To Turn Nasdaq's 90x Into 22x In 3 Easy Steps | Zero Hedge What Is The PE Of The iShares Biotech ETF? It Depends On Whether You Read The Fine Print | Zero Hedge Looks like P/E numbers can't really be trusted. Shame there isn't a standard mandatory way of calculating so everyone is talking about the same thing.

I do find that odd. Seems to me that the P/E of ANY basket of stocks is the price of a share of that basket divided by the net earnings that the stocks contributed to a share of that basket. No adjustments needed.

So if a share of the basket held 100 shares of a stock with a $1/share earnings, and another 500 shares of a stock with a $0.01 loss, and all other stocks had exactly zero earnings, the P/E is (Price of the basket)/ ($100-$5).

Why should it be anything else?

Quote:

Originally Posted by target2019 When discussion includes a very broad term like index, I try to find an example or definition: Index Investing This article helps to answer the initial question: Index Investing: What Is An Index? Still, some can use the terms to suit their viewpoint or purpose. Many around here will use index as short name for S&P500. The S&P500 can be divided into value or growth companies. You can go further in segmenting (as in sectors). Since companies succeed and fail over time, the lineups change as companies rise and fall in ranking.

Sure, and this is literally semantics, but I do think context makes it clear in most cases. Just because there are lots of sub-classes of a word, doesn't mean we are referring to any of those sub-classes in general use, and we would normally specify that.

Example:

If you say "I drove my car to the store to get some groceries, and drove home", people picture a typical passenger car. But there are all sorts of cars. Yet, no one would think you drove a NASCAR race car to the store, or a kids toy electric car - but those are both 'cars'.

If you did anything like that, you would specify: "I got to drive a Race Car to the store, man, I had to avoid the cops, and did I ever get the looks! But I made it there in record time!", or "I drove the grand-kid's toy electric car to the store, took a long time, and I sure got the looks!".

If I'm talking about a fund that does a 3x leverage short on precious metals, I'm going to specify that, and not just say "I think a 60/40 AA is good, and just invest in index funds".

-ERD50

[Rianne]

Quote:

Originally Posted by ERD50 Well OK, but I'm kinda surprised that there is any confusion when these terms are used in context. To me, it's like reading a recipe in the local paper that lists: 1 Cup Whole Milk 1 Tablespoon Sugar in the ingredient list. I assume that to be Cow's milk, not goat's milk or Almond Milk or Soy Milk, or they would have specified. Same with the sugar, just regular old "Table Sugar", not powdered sugar, not brown sugar, etc. So if I'm talking about a simple portfolio and suggest keeping it simple with "index funds", and say I think one Stock fund and a Bond fund are enough, and heck, you can throw in some REIT or International if you want. You think that for the stock and bond portion that people might be confused and think I'm talking about some sector of each (like only Telcomm, or only Pharma, or only Petroleum)? Or Bonds are only grade such and such from a single industry? Maybe if the poster is a new and unfamiliar with the terms, some specificity is in order, but that's usually clear, and probably provided? But otherwise? OK, if this bothers you, what terms should I use? How specific when I'm just talking general AA and index funds. To be honest, I'd have to look up TSM, I really don't know how "total" total is (5000? and is that "total"?). I personally don't get into even differentiating much between a S&P 500 fund versus Russell 2000 for my own investment purposes, and don't consider it a big deal unless the conversation is getting into those specifics (then people should specify, small cap, or whatever). Do we need to throw "US" in there, so nobody thinks we are talking International stocks? I'm not trying to be a smarta$$, I honestly don't know how far you two think this should go. Sounds good to me! -ERD50

Hahaha! That was brilliant. I just thank Jack Bogle. Send the $$ in, pick a place to put it and watch it grow. We were so naive, ummm, this fund looks good, there's a bunch of stuff in there, let's try it.