I've read a bit about Index Funds which seem to be rated quite well and are inexpensive to run - but not if they are "managed". Is that correct? Is Vanguard the only Australian company to offer them? What is your opinion of them?

ANSWER:

Index funds are also offered by State Street. The rationale for higher charges on a managed share trust is that the manager has to do an awful lot of work researching companies and trying to pick winners. Obviously this is not the case with an index tracker.

It’s important to take advice to ensure you choose a fund that’s appropriate for your own situation. A 2 or 3 per cent difference in return can make a huge difference over a long period and at least 25 per cent of actively managed funds outperform the index.