Why I Invest in Low-Cost Index Funds — My Passive Investing Strategy

Why I Invest in Broad Index Funds — Not Individual Stocks

My Simple Investing Philosophy

I often get asked: “What do you invest in?”

My answer is always the same: broad index funds with very low fees, usually under 0.05%.

People are sometimes surprised. With my background in finance and investing, why don’t I pick individual stocks?

The reason comes straight from John Bogle’s book The Little Book of Common Sense Investing. Bogle explains that most fund managers do not beat the market over long periods once fees and taxes are included.

What the Data Shows

This idea isn’t just theoretical — it’s backed by independent research.

S&P Global’s SPIVA reports measure how actively managed funds perform against their benchmark indices:
https://www.spglobal.com/spdji/en/research-insights/spiva/

Here are a few key findings:

• United States:
  Over the last 15 years, 88% of actively managed large-cap mutual funds underperformed the S&P 500 Index.
  Direct link to the report:
  https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-year-end-2024.pdf

• Europe:
  Over the last 10 years, 92% of actively managed large-cap mutual funds underperformed the S&P Europe 350 Index.
  Direct link to the report:
  https://www.spglobal.com/spdji/en/documents/spiva/spiva-europe-year-end-2023.pdf

Year after year, these high-fee funds fail to outperform the index consistently.

Some may point out that a few funds do outperform, but for me, I prefer not to gamble on a 10% chance of beating the market when I can essentially guarantee matching the market’s return simply by investing in index funds.

Why Index Funds Work for Me

1. Guaranteed exposure to the market
I don’t need to guess which individual stocks will win. I invest in the entire market.

2. Extremely low fees
Costs matter. Lower costs mean more money compounding for me over time.

3. Tax efficiency
Index funds typically trade less, producing fewer taxable events.

4. Evidence-based investing
SPIVA data consistently shows that the majority of active managers cannot beat their index over the long run.

Investing on Regular Intervals

It’s nearly impossible to time the market consistently, even for seasoned professionals. A simpler and far more reliable approach is to put your investing on autopilot through dollar-cost averaging—buying the same amount at regular intervals, regardless of market conditions. By steadily investing each month, even as little as $100 or €100, you smooth out volatility and harness the power of long-term compounding. Over time, those small, consistent contributions can grow into something meaningful.

In fact, If I assume $100 a month invested in the S&P 500 from 1985 to 2024 assuming dividend's are reinvested and not accounting for tax, I would have over $700,000 today!

What You Can Take Away

If you are exploring long-term investing strategies, here are some principles I follow:

• Focus on broad, low-cost index funds

• Avoid high-fee active funds unless you have a very specific reason

• Invest for the long term, not for short-term market predictions

• Invest on regular intervals through dollar cost averaging.

Disclaimer

This content is for educational purposes only and does not constitute financial or investment advice.
Always do your own research or consult a licensed financial professional before making investment decisions. Past performance is not indicative of future performance.