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There are articles that say "buying" an index is a very good approach to investment, that beats most of the active funds. But, looking at the value of FTSE 100 for the past 20 years, it has roughly stayed within a 4000 to 7000 points interval. So, for someone who just buys at regular intervals, I think that such on index brings roughly no value in the long run, especially not the average 8%/year that I read about.

I understand that there are other indexes (e.g. DJIA) that have performed much better, but can someone please explain to me whether there is something that I have missed about this passive approach to investment?

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    "... the average 8%/year that I read about" Remember that there are long stretches (measured in decades) where bonds outperform stocks.
    – Flux
    Commented Sep 25, 2020 at 12:54
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    @Flux Doesn't mean they do in the long run.
    – Jonast92
    Commented Sep 25, 2020 at 13:05
  • @Flux - (A) what was one period-of-decades where bonds outperformed stocks? (B) while interesting, it is totally unrelated to the question (I think?) For example "real estate often does much better" - so what?
    – Fattie
    Commented Sep 25, 2020 at 13:12

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With all indexes, you have to differentiate between performance index and price index.

The FTSE 100 is a price index, which means that only the current values of the contents are used when calculating it. Dividend payments are not contained and must be accounted for separately.

Suppose you have a security which is $100 worth. Its value rises over the next months to $105, and then there is a dividend payment of $5. So it retured to $100.

Considering the price, the security didn't gain in value, but you had the dividend payment which gave you a return of $5, i. e. 5%.

The same holds for price index vs. performance index: the first only looks at the price, the second one considers the complete performance.

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    @gaefan only if the index uses a very dumb direct average without weightings.
    – Ganesh Sittampalam ♦
    Commented Sep 25, 2020 at 12:32
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    @gaefan Isn't price-adjusted data the norm for retail investors?
    – Flux
    Commented Sep 25, 2020 at 12:59
  • @gaefan , that is totally, completely wrong.
    – Fattie
    Commented Sep 25, 2020 at 13:10
  • I really don't understand how this answers the question. Some index funds are crap, and some index funds happily follow the "8% rule". Can anyone speak to the difference?
    – Fattie
    Commented Sep 25, 2020 at 13:12
  • Thank you @glglgl. So for someone looking just for simple investment, I suppose ISF iShares Core FTSE 100 UCITS ETF is probably the one to chose against CUKX iShares Core FTSE 100 UCITS ETF GBP (Acc). But, in this case, how is the accumulating fund used given that it's value never goes too high?
    – Ion Ionascu
    Commented Sep 27, 2020 at 10:28

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