As we described in this related article, we’re fans of taking a rules-based approach to investing instead of trying to actively forecast a market’s next move or a stock price’s next swing. Attempts to outsmart the market are more likely to waste your energy than deliver higher long-term returns.

So, this begs the question: Why don’t we recommend index funds exclusively for our clients?

We really like aspects of the indexing philosophy. Passively managed index funds typically employ a rules-based strategy to capture returns by tracking a popular index at a low cost. So far, so good. But, as we focus in, like we did in this piece, we start to find some inefficiencies that point to why index funds may not be the optimal vehicle for clients looking to maximize market returns. Curious to learn more? Give us a call.

Hill Investment Group