But enough of you have written letters like this in recent weeks - or have asked something like: "What's a good way for a novice to get into the share market?" - that it must be time for another introduction to the index fund concept.
Index funds invest in the shares in a share index, which has been set up to measure the performance of a sector of a share market.
Examples of indexes are the NZSE40, which shows how the biggest 40 local shares are doing, and the Dow Jones Industrial Average, which shows how 30 major US companies are doing.
An index fund, which holds each share in proportion to its weighting in the index, will perform pretty much the same as the index it is based on.
Other non-index share funds that invest in the same market sector, but which have managers who choose which shares to buy and sell, will sometimes perform better than the index, sometimes worse. It depends on how good the managers' choices are.
But these funds - called active or actively managed - cost more to run than index funds. The managers are well paid and there are trading costs. So management fees are higher.
Because of this and because no manager always makes the right share trading decisions, most active funds tend over the long run to perform worse than index (or "passive") funds, especially after fees are taken into account.
There are a few exceptions. But nobody knows in advance which active funds will prove to be exceptionally good. It's a better bet to go with an index fund.
In New Zealand, index funds have another advantage, too. Because of the way they are run, they don't have to pay tax on their capital gains, whereas active funds do. This boosts the returns on index funds.
There are several funds that invest in New Zealand indexes, including the NZSE10, NZSE40, the index of middle-sized companies and the property companies index. And there are couple of New Zealand-based funds that invest in Aussie indexes.
There are also three funds based here that invest in modified (mainly for tax reasons) versions of the MSCI index of the biggest companies listed on world share markets.
Those three funds are: AMP's WiNZ; Tower's TORTIS-International and the newly launched BNZ International Equity Index Trust.
A little more than half of each fund is invested in US shares, and the rest is in shares in Britain, Germany, Canada, Japan and Australia.
With your money spread around all those economies, and many different industries, you get great diversification.
WiNZ and TORTIS-International have performed astonishingly well in recent years, with annual returns around 25 to 35 per cent.
But that's unlikely to continue. They could report negative returns in a given year. For that reason, these funds - like any investment in shares - are suitable for long-term investment only.
Before getting into the funds, I suggest you ring AMP, Tower and BNZ and ask them to mail you their fund's investment statements. Read them; they're usually pretty short and straightforward.
Because WiNZ is listed on the stock exchange, you pay brokerage to get in and out. It's cheaper to use a discount sharebroker or buy on the internet.
The other two funds are not listed. If you buy directly from Tower, BNZ or a discount sharebroker you may be able to pay no entry fee.
But Tower and BNZ recommend you go through an adviser, who will charge anything from zero to 5.5 per cent on the Tower fund, zero to 5 per cent on the BNZ fund. Always ask an adviser what the charge will be.
The minimum entry into the Tower fund is $1000, or you can drip feed $100 or more a month, with no initial lump sum. BNZ's minimum is $5000, and it has a similar $100-plus drip feed scheme.
The minimum in WiNZ is whatever level your sharebroker sets. You can drip feed $250-plus a month into WiNZ via an AMP plan, or set up a plan with your broker.
Q. I have 14,000 units in the WiNZ fund. The fund has semi-annual distributions and I have elected to reinvest my dividends.
Unfortunately for the last three distributions I have received additional units on only one occasion. It appears that you have to have a significant investment in the fund or the dividend is less than the management fee and is written off.
I realise that my investment has grown with the increase in the value of the units (and I am very pleased with the return), but I would also like to accumulate more units through reinvestment of dividends.
My question is, what value does an investment in WiNZ have to be to guarantee a reasonable addition of units at each distribution?
