The Case for Index Investing

Vanguard Research

Since its beginnings in the early 1970s, indexing as an investment strategy in the United States has grown rapidly and has performed favorably in relation to actively managed investment strategies. Indexing has many recognized advantages: low costs, broad diversification, minimal cash drag, and—for taxable investors—the potential for tax-efficiency. In an updated Vanguard research paper, "The case for index-fund investing," authors Christopher B. Philips, Francis M. Kinniry Jr., David J. Walker, Todd Schlanger,  and Joshua M. Hirt review indexing as an investment strategy, focusing on the concept of investing as a "zero-sum game," the importance of costs, and the application of indexing across asset and sub-asset classes.

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© 2015 The Vanguard Group, Inc. Used with permission.