Index funds

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Index funds are investment funds that replicate a certain stock market index (e.g. DAX , Dow Jones Industrial Average ) as precisely as possible. To achieve this, the funds invest, for example, in the securities underlying the index in the same proportion as the index. Other funds use derivatives ( swaps ) to link fund performance to the index.

The replication error indicates how exactly the underlying comparison group is replicated . The lower this number, the more similar the performance of the fund to that of the benchmark index. Most of the index funds are offered in the form of exchange-traded funds (ETF). But there are also index funds that were launched as conventional funds.

history

The first non-public index fund was launched as a pension fund in 1971 and was referenced on the New York Stock Exchange . The first publicly available index fund was launched by John Bogle in the mid-1970s to replicate the S&P 500 .

In Germany, index funds are only possible with the entry into force of the 3rd Financial Market Promotion Act in April 1998, as the legal investment limits of the then law on capital investment companies (now incorporated in the capital investment code ) did not allow an index to be precisely replicated. At the beginning of 2010, 550 index funds were registered on Deutsche Börse in Germany . The investment volume of these index funds was around 120 billion euros. In 2009, almost 2,000 index funds were listed worldwide with an investment volume of 1.03 trillion US dollars at the end of 2009.

Methods

A distinction is made between synthetic and physically replicating index funds. With the physical method, the securities contained in the index are purchased directly according to the specified weighting. The securities are actually held by the manager of the fund or by the institute commissioned by him. With the synthetic method, the performance is based on swap transactions with another financial institution. In this case, too, the index and its performance can be mapped as identically as possible.

Advantages and disadvantages

Unlike index funds attempt at an actively managed the fund manager by a special bond selection, the performance of an index to surpass. However, a growing number of scientific studies show that the majority of actively managed funds (up to 98%) cannot beat their benchmark index and that the small group of actively managed funds that beat their benchmark index over a period of time are constantly changing in their composition and is unpredictable for the next period of time. Put simply, this means that there are no "excellently managed" funds that can consistently outperform their benchmark index over a longer period of time (more than 5 years). These results call into question the basic idea of ​​actively managed funds. For these reasons, consumer advocates and financial experts recommend index funds based on market-wide indices as a basis for private investments, especially for long-term asset accumulation, for most investors .

The fact that these passively managed funds no active management is necessary, the management fees ( Total Expense Ratio , English total expense ratio TER, abbreviated) of index funds generally with typically about 0.1 to 0.2%, significantly lower than the funds managed by active Fund with around 2-3%. Due to this cost structure, which is more favorable for the investor, banks often have little interest in actively selling these products. For professional investors and asset managers, however, index funds play a major role in the composition of their portfolios.

A very popular alternative to index funds in Germany are index certificates , which, however, also involve a credit risk with regard to the issuer, since certificates are bearer bonds . In addition, many index certificates are not based on a performance index , but on a price index , so that dividends paid by the companies represented in the index are not passed on to investors.

A possible disadvantage of only partially replicating index funds is that under certain circumstances they invest the fund's assets exclusively in the most heavily weighted stocks in the index shown, the performance of which therefore strongly determines the development of the investment (see also index replication ).

Web links

Wiktionary: Index funds  - explanations of meanings, word origins, synonyms, translations

Individual evidence

  1. ↑ Kate Ancell: The Origin of the First Index Fund. (PDF; 153 KB) University of Chicago , March 28, 2012, accessed on September 21, 2014 .
  2. ↑ A "madness" conquers the financial markets. In: Süddeutsche Zeitung . April 14, 2010, accessed September 21, 2014 .
  3. ^ Well invested a trillion dollars in index funds , in: Frankfurter Allgemeine Zeitung of January 14, 2010
  4. ^ A b Daniel Mohr: Stock market: Most fund managers are not worth their money . In: Frankfurter Allgemeine Zeitung . October 29, 2015, ISSN  0174-4909 ( faz.net [accessed February 3, 2017]).
  5. ^ R. Arnott et al .: How well have taxable investors been served in the 1980s and 1990s . In: Journal of Portfolio Management . 2000, 26, 4.
  6. ↑ Aye M. Soe, Frank Luo: Does Past Performance Matter? S&P Persistence Scorecard . June 7, 2012, doi : 10.2139 / ssrn.2079822 (English).
  7. ↑ Stiftung Warentest: Funds and ETFs put to the test - Tips for finding funds - Test - Stiftung Warentest. Retrieved February 3, 2017 .
  8. ↑ the Finanztip editorial team: ETF: This is how savers benefit from the stock market at low prices . In: sueddeutsche.de . September 1, 2016, ISSN  0174-4917 ( sueddeutsche.de [accessed February 3, 2017]).
  9. ↑ Invest easily and cheaply in stocks - with index funds (ETFs) - financial tip . In: Finanztip . ( finanztip.de [accessed on February 3, 2017]).