INVESTING STRATEGY
Drawbacks to index funds?
Hi all! I've finally got around to reading The Barefoot Investor on a friend's recommendation, and it's got me excited about index funds. I've never invested in shares before, but from what I gathered in The Barefoot Investor, index funds seem like a safer bet. I'd be keen to get started, but I'm wondering if there are any drawbacks I should know about?
Ruby Martin.
16 April 2025
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The drawbacks are you’ll never beat the market. You’ll also have to sit though periods where your portfolio will be down a lot – during covid prices fell about 35% for example. In the GFC it was about 50%.
These periods are relatively rare, but it’s the one reason many people can’t get comfortable with shares, so it’s by far the biggest drawback to be aware of with shares in general.
Index funds are pretty boring investments, so that might be another drawback. You also might end up owning shares in companies you don’t like. But I don’t personally see those as drawbacks, since the alternative options also have drawbacks.
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