[Poll] Why do you use indexing? (select multiple)

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Why do you use indexing? (select multiple options)

Diversification
141
22%
Low cost
148
23%
Low tax
85
13%
Automatic investments
20
3%
Easy to track the performance
46
7%
Outperforms 70% of active funds every year (for TSM)
106
17%
Backed by a portfolio theory (market portfolio)
71
11%
other (plz specify)
17
3%
I don't use indexing
5
1%
 
Total votes: 639

Topic Author
acegolfer
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[Poll] Why do you use indexing? (select multiple)

Post by acegolfer »

I tried to come up with reasons why one uses indexing. I listed them in a multiple selection poll. I'll appreciate if you can participate and also add reasons that I missed.

To mod,
TBH, I don't know how multiple selection poll works. If this becomes a meaningless poll, please remove it.
Last edited by acegolfer on Fri Jan 02, 2015 3:06 pm, edited 1 time in total.
island
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Re: [Poll] Why do you use indexing? (select multiple)

Post by island »

Asking people to tell you why is probably more meaningful than a multi selection poll since can't tell if individuals chose 1 or multiple answers or explain their rationale, which would be the most meaningful info as far as I'm concerned. All are good reasons.
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leonidas
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Re: [Poll] Why do you use indexing? (select multiple)

Post by leonidas »

I guess I got tired of under-performing the averages. I always used Index funds but never 100%. The research presented pretty much made a clear cut case to me that this was the best route. Now I am 85% index and happier for it. I also no longer go nuts looking for the next big thing. For a while I was a fund "collector".
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mickeyd
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Re: [Poll] Why do you use indexing? (select multiple)

Post by mickeyd »

Voted low cost but had to narrow it down to that and diversification. Low cost won out because you can get diversification in other places but there are few other places that deliver the low cost that I require.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
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asset_chaos
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Re: [Poll] Why do you use indexing? (select multiple)

Post by asset_chaos »

Among other reasons, I ticked the box for portfolio theory, but what I really mean by that is that indexing is the only investment management thesis where I understand why it works. I distincly remember reading through the Investment Company's book describing every mutual fund in America---in the 80s free by mail for the asking---and being overwhelmed by the hundreds of funds touting their "value" or "growth at a reasonable price" strategies as the reasons they would outperform. I was a lot more investment ignorant then, but even I could figure out that they couldn't all be right. And then there was the lone page from a little company called Vanguard explaining that their fund bought the stocks of the S&P 500 and earned the market return minus costs that were as low as could be because Vanguard was a mutual organization. Aha, I could understand why that worked, so I invested there. Shameful admission: I recall thinking at the time that market returns would be an ok place-holder investment until I figured out how to pick the manager(s) that would out certainly perform. But my reading over the subsequent years disabused me of that notion, and I've never looked back from indexing. This one time ignorance and naivety combined to make the best choice. Lucky me.
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CABob
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Re: [Poll] Why do you use indexing? (select multiple)

Post by CABob »

There is perhaps an argument for simplicity that would suggest the use of index funds.
Bob
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Svensk Anga
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Re: [Poll] Why do you use indexing? (select multiple)

Post by Svensk Anga »

I have been thinking about risk a lot as I approach retirement. My need to take risk is diminishing. It seems logical in this context to ditch the risk of an active manager under-performing the market. I have been closing out positions in individual stocks and managed equity funds with proceeds going largely to index funds. (Also buying individual TIPS, I-bonds, and CD's.)
fposte
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Re: [Poll] Why do you use indexing? (select multiple)

Post by fposte »

CABob wrote:There is perhaps an argument for simplicity that would suggest the use of index funds.
Agreed. It removes the pressure to pick and choose well.
chaz
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Re: [Poll] Why do you use indexing? (select multiple)

Post by chaz »

It is the smart way to invest!
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
TooLateSmart
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Re: [Poll] Why do you use indexing? (select multiple)

Post by TooLateSmart »

The choice that I would have made if it were there is this:
* Indexing is the opposite of "Active Management"

Another way to look at is eliminating the guesswork that gets you in trouble.
crg11
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Re: [Poll] Why do you use indexing? (select multiple)

Post by crg11 »

Simplicity for me. I spent 10 years listening to 401k advisors giving me BS about what my portfolio should look like, but not the why behind their suggestions. Indexing is the first investment philosophy that made sense to me and that I could easily follow.
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acegolfer
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Re: [Poll] Why do you use indexing? (select multiple)

Post by acegolfer »

CABob wrote:There is perhaps an argument for simplicity that would suggest the use of index funds.
Is it too late to add simplicity as another choice?
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Toons
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Re: [Poll] Why do you use indexing? (select multiple)

Post by Toons »

It IS the market and its inexpensive. :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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acegolfer
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Re: [Poll] Why do you use indexing? (select multiple)

Post by acegolfer »

Here's a fun one: If a stock skyrockets, I can say to others that I own that stock.
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iceport
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Re: [Poll] Why do you use indexing? (select multiple)

Post by iceport »

When I responded I tried to distinguish between the primary reasons I use index funds and the aspects that are just nice incidental benefits.

Broad diversification, rock-bottom costs, and tax-efficiency are why I use index funds. The rest is just icing on the cake.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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GerryL
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Re: [Poll] Why do you use indexing? (select multiple)

Post by GerryL »

Indexing offers features I favor: easy diversification and low costs, plus it is supported by research [theory] and it is simple/easy to understand [other].
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rob
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Re: [Poll] Why do you use indexing? (select multiple)

Post by rob »

I just don't believe that a manager adds value outside of pure luck. Combined with expenses, that's why I index...... however I do NOT do total mkt indexes, so not sure what that says.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
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grabiner
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Re: [Poll] Why do you use indexing? (select multiple)

Post by grabiner »

I want investments which are low cost, well diversified (within whatever market segment they follow) and keep a consistent style.

Index funds do all of these. In an IRA or 401(k), there are low-cost active funds which do the same; I have held Vanguard Growth&Income, Windsor, and International Explorer in the past because they were the best way to get what I wanted.
Wiki David Grabiner
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TheTimeLord
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Re: [Poll] Why do you use indexing? (select multiple)

Post by TheTimeLord »

Got tired of the time investment required to invest in individual issues. Just worn out and ready to make investment a lower priority.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
gkaplan
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Re: [Poll] Why do you use indexing? (select multiple)

Post by gkaplan »

grabiner wrote:I want investments which are low cost, well diversified (within whatever market segment they follow) and keep a consistent style....
This pretty much sums up my reasons.
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White Coat Investor
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Re: [Poll] Why do you use indexing? (select multiple)

Post by White Coat Investor »

Eliminate manager risk. Why run a risk that is not only uncompensated but negatively compensated when you don't even have to?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Median Joe
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Re: [Poll] Why do you use indexing? (select multiple)

Post by Median Joe »

*If* I can beat the index by, say, 1% and that requires me spending lot of time doing it, it may not be worth it.
gkaplan
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Re: [Poll] Why do you use indexing? (select multiple)

Post by gkaplan »

EmergDoc wrote:Eliminate manager risk. Why run a risk that is not only uncompensated but negatively compensated when you don't even have to?
This too.
Gordon
LeeMKE
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Re: [Poll] Why do you use indexing? (select multiple)

Post by LeeMKE »

Simplification.

Low Cost and Diversification are tenets I've always required.
The mightiest Oak is just a nut who stayed the course.
tdm
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Re: [Poll] Why do you use indexing? (select multiple)

Post by tdm »

I'm surprised that there were 5 votes for NOT using indexing...
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Aptenodytes
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Re: [Poll] Why do you use indexing? (select multiple)

Post by Aptenodytes »

I added an 'other' because simplicity and ease of rebalancing are other reasons I used index funds. That is, I could capture most of the other benefits without using index funds but it would be a lot of work.
basspond
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Re: [Poll] Why do you use indexing? (select multiple)

Post by basspond »

Simplicity and "unstressful".
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