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For a long time, investing in shares meant one of two things: spending your evenings poring over annual reports to pick the winners, or entrusting your savings to a bank fund whose manager promised to beat the market.
Both approaches had an uncomfortable side. After trading costs, entry fees and annual management charges that often came to around 1.5% to 2% for traditional funds, a large share of active investors and professional managers underperformed the broader market over the long run.
Today, millions of investors take a different route. Instead of trying to beat the market, they buy the whole market, through index funds and ETFs (exchange-traded funds) that track the S&P 500, the Nasdaq-100 or a world index. In Flanders and the Netherlands, this approach has earned a fitting nickname: hangmatbeleggen, or hammock investing. A broadly diversified, low-cost portfolio, set up to stay in place for the long term, while time and compounding do their work.
From “Bogle’s Folly” to market giant
The idea that investors are better off not picking individual stocks was long considered heresy on Wall Street. In four steps, it grew into a foundation of modern finance.
1976: the S&P 500 and “Bogle’s Folly”
Inspired by academic research from economists such as Paul Samuelson and Eugene Fama, which suggested that markets are remarkably efficient, Vanguard founder John “Jack” Bogle launched the First Index Investment Trust in 1976: the first index fund for retail investors, tracking the S&P 500. Wall Street mocked it as “Bogle’s Folly”, and at launch the fund raised only a fraction of its target. Yet Bogle’s reasoning held: without expensive analyst teams and with minimal costs, the index fund outperformed most active managers over the long term.
1993: the first modern ETF
A traditional index fund could only be traded once a day, after the market closed. In January 1993, State Street launched the SPDR S&P 500 ETF Trust. For the first time, anyone could buy or sell a slice of the 500 largest US companies during trading hours, just like a regular share.
1999: the Nasdaq-100
As the personal computer and the internet took off, investors wanted targeted exposure to innovation. In March 1999, Nasdaq launched an ETF tracking the Nasdaq-100, the 100 largest non-financial companies on that exchange (later taken over by Invesco). Nasdaq-100 trackers became the best-known way to grow alongside technology companies such as Apple, Microsoft, Amazon, Alphabet and Nvidia.
2000–2020: world indices and the European ETF market
To avoid betting on a single country, global indices moved centre stage, such as the MSCI World (large and mid-sized companies from 23 developed countries) and broader versions such as the FTSE All-World and the MSCI ACWI, which also include emerging markets and smaller companies. In Europe, the UCITS framework, the European rules for investment funds, drove strong growth in ETFs tracking these indices.
What do we mean by “Class A funds”?
In fund terminology, “Class A” usually refers to a share class: the same fund can have several classes, with different costs, currencies or dividend policies. At Vermeeren & Van Haute, we use the term more broadly, for a category in our portfolio: large, liquid, low-cost funds tracking leading indices such as the S&P 500, the Nasdaq-100 and the world index. They form the stable core around which the other domains are built.
Two features make these funds attractive:
- Low costs: thanks to their scale, the annual ongoing charges (the TER) of the large index funds are often between roughly 0.03% and 0.20%, compared with 1.5% or more for many traditional active funds. Over long periods, that difference adds up.
- Accumulating or distributing: distributing funds pay out dividends, accumulating funds automatically reinvest them in the fund. Which suits you depends on your situation. Tax treatment also differs by type of fund and can change; seek personal advice on this.
The three major indices compared
| Feature | World index (MSCI World) | S&P 500 | Nasdaq-100 |
|---|---|---|---|
| Number of companies | Well over a thousand large and mid-sized companies | Around 500 | 100 |
| Region | 23 developed countries (MSCI ACWI: emerging markets too) | United States | Mainly United States |
| US share | More than 70% | 100% | Almost all |
| Sectors | Broad, with a large share of technology | Broad, technology is the largest sector | Heavily tilted to technology, no financial companies |
| Role in a portfolio | Broad, global foundation | Core in large US companies | Targeted, more volatile technology exposure |
The principles behind hammock investing
Hammock investing distils decades of financial research into a few simple principles:
- Don’t forget inflation: money left in a savings account for years slowly loses purchasing power to inflation.
- The whole haystack instead of the needle: instead of searching for the one winning stock, an index investor owns thousands of companies worldwide through one or a few funds. As sectors rise or fade, the index adjusts its composition by itself.
- Regularly and without emotion: by investing a fixed amount every month, at high and low prices alike, the pressure to pick the “right moment” disappears, and with it the panic selling.
- Mind the small print: costs, the type of fund, the ISIN code and stock exchange tax differ by product and can noticeably affect the end result.
How index funds changed the markets
What started as a niche strategy for cost-conscious savers has become a dominant force. In 2024, passive funds in the United States held more assets than active funds for the first time, and in Europe, too, index funds and ETFs are growing fast. This shift has had two major consequences:
- Lower costs for everyone: index funds forced banks and active managers to cut their fees, saving investors a great deal of money every year.
- More concentration: the major indices weight companies by market value. With the strong growth of the largest technology companies, the ten largest companies in the S&P 500 now make up more than a third of the index, and even the broad MSCI World is more than 70% US companies. Combining an S&P 500 fund with a world fund therefore mostly creates overlap, with little extra diversification.
The core lesson of the index revolution still stands: a long-term view, low costs, broad diversification and discipline. Even a simple approach, though, calls for attention to concentration, costs and taxes.
How we see it
At Vermeeren & Van Haute, Class A funds form the stable core of the portfolio in which we invest for our own account. They offer broad diversification at low cost, and give us room to take a more targeted approach in the other domains.
This article contains general information and is not investment advice, an offer or a recommendation to buy any particular fund. Investing involves risk; the value of an investment can fall and you may lose (part of) your investment. Past returns are no guarantee of future results. Tax rules depend on your personal situation and may change.