What is index investing? Index investing allows investors to use index funds to build investment strategies with the following features firstly access the whole Market in one trade through investing in a mutual fund and ETF or other index product which tracks the performance of the specified index. It is possible for an individual investor to create portfolio themselves in an attempt to mimic the performance of an index by buying the constituent Securities in the appropriate weights. However, this is unlikely to be cost-effective for most individual investors because due to the smaller size of Trades that the individual is likely to make the transaction costs per dollar invested will mean that the performance of the portfolio will be substantially less than the index itself. This is less of an issue for mutual funds or ETFs due to the economies of scale that arise from potentially being a multi-billion dollar fund as is the case with the largest US Equity ETFs.

Index funds tend to have lower fees and actively managed funds. This is partly due to the lower frequency of trading required to track an index and lower research costs when compared to an actively managed fund since the index fund is not attempting to identify missed price Securities index funds do still require precise daily portfolio management and careful decision making to ensure that the fund tracks the stated index while index investing does forgo the opportunity to substantially outperform a benchmark as is the case with actively managed funds index funds also reduce the risk of Benchmark under performance relative to an actively managed fund.