This post is based on a publication from BlackRock, Inc.
Index investing has profoundly changed the way investors seek returns, manage risk, and build portfolios. For nearly 50 years, index investment vehicles have lowered costs and simplified access to diversified investments for all investors, from sophisticated institutions to individuals. Technology and data have also transformed the range of investments that can be tracked by an index. Choice now extends beyond traditional equity indexes, which include stocks in proportion to their market-capitalization, to a whole array of more dynamic indexes compiled according to other methodologies. [1] These can be used to create investment products that serve a wide variety of needs—for example, products that track indexes with exposure to specific investment styles such as value or quality stocks.