We pursue and systematically implement a passive investment approach for your well-being at BenifMe app. This means we stay clear of expensive investment products that aim to outperform the market. This is because several scientific studies have come to the conclusion that more cost-effective investment funds provide better returns on average than expensive ones (see for example the analysis by Nobel laureate William F. Sharpe, The Arithmetic of Active Management, Financial Analysts Journal, 1991). The deeper reason lies in what is known as market efficiency, which has been described by another Nobel Prize winner, Eugene Fama: In a liquid market, security prices fully reflect all available information.
For this reason, we mainly use ETFs, i.e., exchange-traded funds that track a market index. There are, however, more than three thousand ETFs on the market, not all of them suitable. We select the best ETFs for you. In doing so, we take account of not only the product costs, but also market liquidity and the counterparty risk associated with the structure of the ETF. Finally, we analyze how effectively the ETF tracks the market index (tracking error).