![]() Here are some of the more popular types of index funds available today. Buying and holding securities over the long term reduces volatility and investment costs (including tax) and can lead to better returns in the long run.Investing in all or a representation of stocks in a market index can maximise diversification and reduce risk. ![]() Picking consistent outperformers is almost impossible, so indexing provides a way of accessing market performance without the high costs. This is why when you look at the performance tables at any point in time there are always winners and losers. In fact, when you take costs into account Vanguard founder John C Bogle says investors as a group must underperform the market. Indexing is based on the theory that investors as a group cannot beat the market - because they are the market. This means they invest in all or most of the securities in the index. Rather than trying to guess which investments will outperform in the future, index managers replicate a particular market or sector. How is indexing different to active management?Īctive fund managers try to outperform the index by picking sectors and securities they believe will outperform in the future. Indexes cover almost every industry sector and asset class, including Australian and international shares, property, bonds and cash. Most investment markets have indexes that measure their value over time. ![]() ![]() Index funds are a way of gaining exposure to an investment market. Introduction to indexing What are index funds?
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