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Investing in ETFs offends the human mind.

At least that was the opinion of many stock market professionals when the American John Bogle presented one of the first index funds to the world in the 1970s.

Such funds, better known today by the abbreviation ETF (Exchange-Traded Funds, in German: exchange-traded index funds), simply reflect the performance of an underlying stock market index.

For example, if the American stock market index S&P 500 rises by two percent, an S&P 500 ETF also gains two percent.

This catchy principle caused a lot of opposition at the time.

One criticism was that it was un-American to only aim for the average.

It must be the goal of every investor to find the stocks whose prices are developing best.

Dennis Kremer

Editor in the “Value” section of the Frankfurter Allgemeine Sunday newspaper.

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Daniel Mohr

Editor in the economy of the Frankfurter Allgemeine Sunday newspaper.

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Today, more than 40 years later, the world looks different.

ETFs were able to experience an unprecedented triumph: Investors have invested around ten trillion dollars in index funds, and young people in particular have discovered ETFs for themselves.

But this year, when stock market prices have fallen sharply for the first time in a long time, criticism has suddenly been voiced that is quite similar to the objection from the 1970s.

The argument is: In turbulent stock market phases like the one at the moment, it just shows that ETFs are no good.

Join in with every price movement down unchecked.

On the other hand, a capable fund manager, the argument goes, is able to distinguish between good and bad stocks in difficult times.

This is – it must be said so harshly – nonsense.

It is not surprising, however, that stock market professionals in particular find this insight difficult.

People want to be the best at what they do.

Being content with replicating stock market barometers seems so simplistic that the mind resists it (see above).

Unfortunately, the numbers speak for themselves: Investors are unable to consistently outperform the stock market as a whole.

This is not just the result of theoretical studies for which the American Eugene Fama received the Nobel Prize in Economics in 2013.

Rather, this can also be shown using data for American funds that have a long history.

According to this, funds that were among the best in a five-year period have by no means made it back into the top group in the years that followed.

On the other hand, if you place your fund in the bottom ten percent of your peer group, there is a high probability that it will be included again in the future.

The finance scientist Martin Weber from the University of Mannheim once called this “a persistence in the bad”.

Now, fund managers aren't all total failures.

Studies show that they hold their own in the markets better than private investors.

But first they have to recoup the hefty fees they still charge for their work.

After all, investors only get credit for the performance of a fund after the fees have been deducted.

Even if a fund manager does his job properly, there is not much left for investors in the end.

This is different with ETFs.

Index funds in particular on well-known stock market barometers such as the S&P 500 or the Dax often only cost 0.1 percent in fees.

With a classic equity fund, the costs can quickly be 15 times higher.

A disadvantage that can hardly be compensated for.