Morningstar's Guide to Passive Investing

SPECIAL REPORT: Price is the single most powerful predictor of future returns - and passive funds offer investors exposure to global assets on the cheap

Emma Wall 3 October, 2016 | 9:23AM

When Jack Bogle, founder of Vanguard Asset Management launched the first passive fund in 1975 he was called “un-American”. The financial industry was so against his plan to revolutionise the way that we invest, a campaign was mounted insinuating Bogle was unpatriotic and a fool.

Fast forward three decades and new money invested in passive funds is growing at much faster pace than actively managed funds. In the US last month, investors pulled $18 billion out of active funds, but invested $49 billion into passive funds. The story is similar this side of the pond, the fastest growing part of the market is passively managed funds – and in particular those which are “smart”, or “strategic” and offer investors access to a certain slice of the market.

With new money comes new fund launches, and more choice for investors – who now have to determine not only where they wish to invest; China stocks, commercial property, UK government bonds, but how they want to invest too. In the UK investors have access to more than 3,500 open-end funds, 300 investment trusts and more than 2,000 exchange traded funds. Offering access to the most remote of stock markets, commodities and bonds from as little as £50 a month.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Emma Wall  is former Senior International Editor for Morningstar

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