People seem to love a good debate, especially when it comes to indexing strategies that exchange traded funds (ETFs) follow. The hot argument lately has been over whether market-cap weightings or fundamentally-based weightings are better for creating indexes. To add fuel to the fire, The Wall Street Journal recently ran an add that says, "Happy Birthday, Cap-Weighting … here’s to a wonderful retirement," implying that the market-cap weighted approach is declining. (Also, the Happy Birthday technically refers to the S&P 500 that just turned 50, explains Matt Hougan for Index Universe.)

However, from what little track records are available on fundamentally-based ETFs, they show that the market-cap weighting approach is currently in the lead. Market-cap weighting tends to favor growth stocks while the fundamental approach tends to favor value. Although value has been up for for several years now, most have been on the decline for the last few months, says Jim Wiandt for Index Universe.

Hougan further supports Wiandt’s claim by showing growth is outperforming value by 5.4% year-to-date. Indeed, a look at the Rydex S&P 500 Pure Value (RPV) ETF and the Rydex S&P 500 Pure Growth (RPG) ETF reveals that RPG is above RPV.

Tags: Retirement