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This week we’re exploring the topic of index funds. They get recommended a lot in the FI community as one of the best ways to invest for financial independence.
But why? What’s so special about index funds? Why do index funds work as a strategy for building wealth and passive income? And why are they usually preferred over other strategies? That’s what we unpack today!
If you’re new to investing, index funds are a very simple way to invest in the sharemarket. You effectively own a slice of all the largest companies (say the ASX 300 for example), and benefit from the returns they deliver over time. But you’ll learn that and a whole lot more in the episode! 🙂
- You get what you don’t pay for? (03:00)
- How turnover and tax affects your returns (04:30)
- Diversification, sectors and the future (09:37)
- The biggest winners and distribution of returns (12:46)
- Active managers and the SPIVA reports (16:04)
- Harvesting business returns (19:33)
- What is self-cleansing? (21:01)
- The efficiency of markets (25:58)
- Difference between ETFs and index funds (31:51)
- Listener Question: Does philanthropy play a role in your FIRE journey? (37:07)
Stuff mentioned and further reading:
- The Skew, by Irrelevant Investor
- My Changing Thoughts on Index Funds in Australia
- SPIVA Report 2019 (PDF)
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