Thursday, May 24, 2007

Success of Indexed Funds

Extracted from John Bogle's book.

Index funds have been successful. The total amount invested in classic stock indexed funds grew from USD 16 million in 1976 to USD 445 million (28 times) in 1986 to USD 68 billion (153 times) in 1996 to USD 369 billion (5.4 times) in 2006. It now represents 7 percent of total investments in mutual funds.

The classic funds are those that represent borad stockmarket, such as the S&P 500, Dow Jones Wilshire 5000 and the Morgan Stanley EAFE (Europe, Australia, Far East).


Anonymous said...

Hi Mr. Tan,

USD 369 billion seems pretty gigantic to me. (I have no idea what's the total amount of unit trusts/mutual funds investment in Singapore or reginal countries)

Since index funds rely on low expenses, do you think if the Singapore market is large enough to be viable for any company to offer index funds? Or is it really a matter of education?

--anonymous coward

Tan Kin Lian said...

It is viable to have an indexed fund of SGD 1 billion. The market in Singapore is big enough for many indexed funds, and still enjoy very low cost.

Anonymous said...

Are you intending to start something like what the Vanguard group is doing in the US; having indexed funds in Singapore.

I find that there isn't much choice for index funds or ETF in singapore except for STI ETF and ecently launched LXSOR ETF. However the Lyxor funds are denominated in US dollars which carry more risk.

Why is it the index funds is not taking off here?

Anonymous said...

Beats me too. If the market is large enough, I can only guess that:

* Perhaps many personal investors are still unfamiliar with indexing.

* Also, companies might not want to offer index funds to compete with their existing actively managed funds (and therefore corrode overall profits).

--anonymous coward

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