It is always good to get some positive feedback supporting your way of thinking. Some good news came our way via the comments of David Murray, the chairman of the 50 billion dollar Future Fund. He talked up the value of holding index style investments within his 50 billion dollar investment fund and adding to this some extra risk premium (he used the term alpha risk) to achieve strong long term results.
We employ index funds as the basis of all of our portfolios for clients. They are cheap, effective and backed up by research suggesting active managers perform worse on average. To this core we access extra risk premiums, and therefore returns, by investing in value and small companies through an index style approach. (We also recommend investing in emerging markets in the international share arena.) This is a similar, but not exactly the same, method as David Murray suggests the Future Fund will employ.
If the managers of 50 billion dollars with a long term perspective think this is the best approach - what about you?
For more details about our investment philosophy take a look at our webpage - Building Portfolios.