DIY Investor Magazine
/
December 2015
36
AN ELEVATOR PITCH
The DIY investor can construct a portfolio of passive
investments in line with their risk tolerance.
Indices deliver exposure to most types of investment,
home and abroad, with differing volatility and risk
profile.
If you want a ready made, diversified range of
investments without the costs that come with actively
managed funds you may find index investing an
attractive option; here are five reasons why:
1
INDEX INVESTING IS SIMPLE
By buying an Exchange Trade Fund (ETF) that tracks
a particular index – you are automatically creating a
portfolio of investments as diverse as the companies
that make up the index. Select the indices you wish
to track and set up regular contributions via your
stockbroker; rebalancing is effectively done for you;
markets will rise and fall but you’re in for the long haul.
2
INDEX INVESTING WORKS
After costs and taxes index investors can consistently
beat the performance of the average active investor
and often beat the performance of actively managed
funds. A key factor is their very low cost; a FTSE
100-tracking Legal and General UK 100 Index, charges
just 0.10% which several brokers discount. £10,000
invested, achieving 6% annual growth over ten years
returns £16,929 in a fund charging 1.5% and £19,185 in
one charging 25bps; long term returns with diversified
risk.
