Riding out the storm
Are index trackers the answer to investors’ concerns about protecting their wealth?
In turbulent times, index trackers are one strategy for preserving wealth — but they’re no silver bullet
In an unusually uncertain world, are index trackers the answer to investors’ concerns about protecting their wealth? The short answer is "no"; the slightly more involved response is "maybe". The first answer is "no" because index trackers do exactly what their name suggests — they track an index. So if the basket of shares in that index falls, so do the investor’s returns. Also, index trackers are a manifestation of the passive investment philosophy that, in itself, is no silver bullet for dodging a market crash. The "maybe" answer is valid if investments into these trackers are part of a diversified portfolio that is balanced to protect you against exposure to a single asset class or market. What strengthens the argument is the growing ease with which SA investors can access offshore markets through globally focused funds. This has increased enormously as online platforms have launched and it has become easier to invest in these types of funds with traditional managers.
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