Index funds have transformed investing. They lowered costs, improved diversification, and helped investors avoid many of the most common mistakes. For most people, indexing has been a clear upgrade over trying to outsmart the market.
But even indexing is an active decision. The way an index is built, how it handles income and taxes, and how it’s implemented all influence results in ways that don’t show up in expense ratios.
In Episode 25 of Greenstream, we unpack where those decisions live, why they matter, and how investors can keep the intent of indexing while being more thoughtful about execution. You’ll learn about:
00:00 Is Indexing The Best You Can Do? – why “good enough” investing still deserves scrutiny (1)
01:39 The Evolution of Index Funds – from benchmarking tool to dominant investment strategy (2)
05:46 The Goal of An Index Fund – minimizing tracking error, not beating the market
10:34 Why Indexing Is Still Active – index selection as a subjective decision (3)
13:40 Structural Decisions in Index Construction – S&P 500, QQQ, and what “market” really means (3-6)
16:28 International & Small-Cap Indexes – why similar labels produce very different outcomes (3, 7-8)
21:14 Index Design vs Investor Needs – tax-efficiency and whether an index is built for you (9)
25:50 The Reconstitution Effect – price impact when everyone trades at once (10-12)
34:37 Style Drift Inside Index Funds – how portfolios change between rebalances
37:52 Can Indexing Be Improved? – innovation within rules-based investing
40:02 What Investors Can Do – when indexing is the best option and how to implement it better
Follow on Apple Podcasts: https://podcasts.apple.com/us/podcast/greenstream/id1795467982
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Meet with Pat & Marcus: https://outlook.office365.com/book/MarcusCalendaratGreenspringAdvisors@Greenspringos33.onmicrosoft.com
Sources
1 – Kissinger: A Biography (Isaacson, 2005)
2 – Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever (Wigglesworth, 2021)
3 – Time period: 2021 to 2024. US Index comparisons include average annual returns for CRSP US Total Stock Market Index, S&P Total Market Index, Dow Jones US Broad Stock Market Index, and Russell 3000 Index. Developed ex US index comparisons include average annual returns for FTSE Developed All Cap ex US Index, MSCI EAFE IMI Index (Net), and S&P Developed ex US BMI Index.. Emerging markets index comparisons include average annual returns for S&P Emerging BMI Index (gross div.), MSCI Emerging Markets IMI Index (gross div.), and FTSE Emerging All Cap Total Return Index.
4 – Big Changes For Invesco QQQ: What Investors Should Know (Morningstar, 2025)
5 – NASDAQ-100 Index Methodology
7 – Opinion: The Hidden Costs of Indexing Are Hurting Institutions’ Returns (Dimensional via Institutional Investor, 2025)
8 – When Tracking Error is a Fix, Not An Error (Dimensional, 2022)
9 - Keeping More of What You Earn: Tax Efficiency of Dimensional Equity Solutions (Dimensional, 2025)
10 - Measuring the Costs of Index Reconstitution: A 10-Year Perspective (Dimensional, 2024)
11 - Tesla’s Charge Reveals Weak Points of Indexing (Dimensional, 2021)
12 - Marlena Lee Discusses Shortcomings of Indexing on “Jill on Money” Podcast (via Dimensional, 2024)
Information contained herein has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. It is not intended as the primary basis for financial planning or investment decisions and should not be construed as advice meeting the particular investment needs of any investor. This material has been prepared for information purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Past performance is no guarantee of future results.
