Podcast: Why Invest in Index Funds?

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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! 🙂

 

Discussion points:
  • 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:

 

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