Investing

Index Funds: The Boring Strategy That Beats 80% of Professionals

Why doing nothing with your money might be the most powerful investing move you ever make.

Published by NoBS Finance · 12 July 2026 · 7 min read

Key Takeaways

Over 15-year periods, approximately 80% or more of Australian active fund managers underperform the S&P/ASX 200 index, according to the S&P SPIVA Australia Scorecard.
Index funds give you the average market return at very low cost, without relying on a fund manager to pick winning stocks.
Index funds carry full market risk. When the market falls, your fund falls by the same amount. There is no manager to protect you.
The strategy is simple but the discipline is hard. The hardest part is holding through market crashes and continuing to buy.
ETF fee examples like VAS, VGS, IVV and VDHG are illustrative, not recommendations. Always check current fees before investing.

Index Funds: Boring Is Beautiful

Here is a stat that should make you sit up: over 15 years, the majority of professional fund managers fail to beat a simple index fund. The S&P SPIVA Australia Scorecard, published by S&P Dow Jones Indices, has consistently shown that approximately 80% or more of Australian large-cap active fund managers underperform the S&P/ASX 200 index over a 15-year period.

The exact percentage varies between reports. Check the latest SPIVA Australia Scorecard at spglobal.com for the current figure.

These are people with PhDs, Bloomberg terminals, and seven-figure salaries. And they still lose to a low-cost ETF you can buy from your phone.

What Is an Index Fund?

An index fund (or ETF) holds every stock in an index, like the ASX 200 or S&P 500. No stock picker. No "hot tips." Just the whole market. When you buy an index fund, you get the average return of that market, minus a tiny fee. That is the entire strategy.

Why It Works

Diversification. You own hundreds of companies. One going bust does not matter. Your risk is spread across the entire market.
Low fees. Index ETFs typically charge around 0.07% to 0.10% per year. Active funds charge 1% to 2%. Compounded over 30 years, that fee difference is hundreds of thousands of dollars.
Tax efficiency. Low turnover means fewer capital gains events. Active fund managers buy and sell constantly, generating tax bills that eat into your returns.
You cannot time the market, and neither can the pros. Owning everything means you never miss the winners. The best days in the market often come during the worst periods, when most people are too scared to buy.

The Australian Options

These are examples of index ETFs available on the ASX, not recommendations. Always check current fees and do your own research before investing.

VAS, Vanguard Australian Shares (tracks the ASX 300)
VGS, Vanguard International Shares (tracks global developed markets)
IVV, iShares S&P 500 (tracks the US S&P 500)
VDHG, Vanguard Diversified High Growth (a mix of Australian and international shares in one fund)

How to Start

Open a brokerage account (Stake, SelfWealth, CommSec, or your bank's trading platform)
Set up automatic monthly purchases
Ignore the news
Repeat for 20 years

For a deeper look at why trying to time the market is a losing strategy, read our guide to dollar-cost averaging.

The Catch: Market Risk

There is a catch, and it is an important one. Index funds carry full market risk. When the market falls 30%, your index fund falls 30%. There is no fund manager to move your money to safety. You ride every crash all the way down.

This is not a flaw. It is the design. The point of index investing is that nobody can reliably predict crashes. But it means you need the psychological discipline to hold through downturns and keep buying. If you panic-sell when the market drops, you lock in your losses and miss the recovery.

The hardest part of index investing is not the strategy. It is the discipline to do nothing when markets crash and everyone is panicking. That discipline is what separates the people who build wealth from the people who do not.