The crazy compulsions of index funds

Index tracker funds offer investors a cheap way to mirror the performance of a stock market index. But they expose you to stocks at exactly the wrong time - when they are no longer good value. Tom Bulford explains why, and what the alternatives are.

Imagine this: you are strapped into your seat, the aeroplane is taxiing along the runway and you hear this announcement:

"Ladies and gentlemen. In order to keep costs as low as possible this plane has no pilot. Instead it will be flown by a computer. As an additional efficiency measure we have eliminated the expensive process of checking baggage. In consequence this plane may contain baggage that is toxic or explosive."

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Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.