When exploring a world of investment approaches, it can be helpful to start with familiar territory, like indexes.

Indexes are commonly used as a benchmark for market performance, but how well do you know the various types?

There are different approaches to indexes that create important distinctions.

Take, for example, market cap indexes.

The performance of these indexes tends to move with the crowd.

As demand for a company's stock grows, its stock price and market value also increase.

And when demand for a stock lags, this works in reverse.

The largest companies in these indexes can sometimes become the most overpriced stocks and represent a larger part of the index which may make it more difficult for the stock to grow.

But the market cap index approach isn't your only option for index investing.

That's where fundamental index comes in.

A fundamental index approach is based on a company's economic footprint, not its market value, like most market cap indexes.

It uses key metrics such as sales, dividends, and cash flow.

A fundamental index approach looks at these numbers over the last five years, so it's less impacted by changes from one quarter to the next.

So, which is best? Is a market cap index approach or a fundamental index approach the best index investing strategy to help you reach your financial goals?

We believe they work better together.

The two indexing approaches can compliment each other to help diversify a portfolio.