Index Funds Aren’t a Plan: Why Strategy Still Matters in Investing
Most people who start sorting out their money fall into the same pattern.
They stumble across a few blogs or podcasts, hear about index funds, and walk away convinced they’ve unlocked the secret to investing.
Suddenly they’re all in on this “tool” with a surface-level understanding and no real strategy.
It’s not that index funds are bad. Quite the opposite they’ve been a game changer but the problem lies in how they’re often used.
A lot of this content comes from US voices built around US markets. These content creators speak to their systems, their tax rules, their market structure.
Then Australians take those same words, apply them here and hope for the same result.
I see it all the time.
Someone comes to me and proudly explains they’re investing in ASX ETFs because they want diversification and a simple, low-fee structure. They’ve read the articles and listened to the episodes. It sounds like a safe, well-informed choice.
But when we dig deeper, the truth looks a little different.
Let’s look at what’s actually inside some of these popular Australian ETFs. Take the ASX200 index for example. That’s the top 200 companies listed on the Australian Stock Exchange. Seems broad. Feels safe.
But the reality is this…
Roughly half the value of the index is made up of just the top 10 companies.
And over 50% of that money is going straight into two sectors, banks and mining.
So while it feels like you’re spreading your investment across “everything,” what you’ve actually done is make a concentrated bet. Two industries. One economy. A single tax system. That’s not what I’d call truly diversified.
This is where context matters.
Index investing is one of the most powerful tools available to the everyday investor. But using a tool without understanding the job you’re trying to get done is risky. If you copy a strategy without tailoring it to your goals, your time frame, or your local environment, you’re flying blind.
In Australia, we have unique tax rules, a different economic landscape, and smaller market breadth than places like the US. We also have the added opportunity of access to global investments, different account types, and the ability to blend approaches.
So yes, index investing might be part of your strategy. But it shouldn’t be the whole strategy.
A proper investment plan takes into account why you’re investing, when you’ll need the money, what you’ll use it for, and how it fits with everything else going on in your financial life.
Otherwise, you’re just putting your money into something that feels “safe” without knowing what you’re actually buying.
And if you’re serious about building wealth and using your money as a tool to create options and freedom, then it's worth digging deeper than the headlines.
You don’t need to become an investment expert. But you do need to build a plan that’s grounded in your life not someone else’s blog post.
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