In recent years, the growing popularity of index investing has gained momentum and index funds have experienced an exceptional increase in assets under management (AUM).
This growth has pushed down fees for investors, while also commodifying single asset class index tracking strategies.
In contrast, differences among diversified passive funds have been proliferating due to the growing number of funds offered to investors and the absence of any industry standards around how they should be managed.
This means that seemingly similar diversified index funds can have significant differences in performance. It’s critical investors understand that deviations in performance can occur and to be aware of the underlying causes.
Not all diversified index funds are created equal. Investors should make sure the diversified fund is aligned to their needs and suitable for their circumstances. Equally important is selecting a manager with the expertise, experience and resources to successfully navigate these issues.
To help navigate this complexity, here are 10 important things to consider when choosing a diversified index fund.
What you need to know
The information on this page has been provided by NMMT Limited ABN 42 058 835 573, AFSL 234653 (NMMT). It contains general advice only and a person should consider whether this information is appropriate for them before making any decisions. It’s important a person considers their circumstances and reads the relevant product disclosure statement and target market determination, available from northonline.com.au or by contacting the North Service Centre on 1800 667 841, before deciding what’s right for them.
You can read the Financial Services Guide online for more information, including the fees and benefits that companies related to NMMT, N.M. Superannuation Pty Limited ABN 31 008 428 322, AFSL 234654 (N.M. Super) and their representatives may receive in relation to products and services provided. You can also ask us for a hard copy. Past performance is no guarantee of future performance. NMMT issues the interests in and is the responsible entity for MyNorth Managed Portfolios. All managed portfolios may not be available across all products on the MyNorth platform and are only available via a financial adviser. MyNorth is a trademark registered to NMMT.