Indexing was first introduced in the United States in the early 1970s as an alternative to traditional active investing. Indexing is now an important investment strategy for institutional and individual investors around the world. In Australia, index funds now exceed $200 billion or 12.5 per cent of the total investment management market. Here are some of the benefits.

Long-term performance

Indexing has a proven long-term performance history in all the major asset classes. Although not an indication of future performance, historically, few active managers have been able to sustain above benchmark returns after costs over the long term.

Low costs

Indexing's 'buy and hold' approach can significantly reduce the cost of investing over time. This combined with low management costs make indexing one of the most efficient ways to implement investment strategy and gain exposure to investment markets. 

Tax-effective

Tax can potentially take the largest chunk out of investment returns, including those of large super funds. Indexing is a long-term buy and hold strategy with lower turnover than most active funds. As a result, indexing can reduce capital gains tax liabilities and improve performance potential on an after-tax basis.

Diversification

Index funds invest in all or most of the securities in an index, so they provide diversification. Diversifying across a range of asset sectors, industries and securities can reduce market risk and improve our clients' performance potential.