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The case for low-cost index fund investing

21 May 2018 | Indexing

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Vanguard is excited to share the latest update to our research, 'The case for low-cost index-fund investing.'

In the white paper, we examine how low-cost index-fund investing has proven to be a successful strategy since the launch of the first index fund in the U.S. in 1976. We also highlight three reasons why we expect index investing to continue to be successful.

One of the reasons we are confident in the future of indexing is the zero-sum game theory, which states that in the aggregate, half of investor dollars outperform and the other half underperform the market average.

Once investing costs are subtracted, it is much more difficult for investors to outperform the market as a whole.

To be successful at the zero-sum game, investors must be able to find the minority of active investments that can consistently beat the market, despite their higher costs.

An alternative is to use an indexing strategy that minimizes costs so that, over time, investors achieve a return close to the market average.

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