Index funds should be the cornerstone of long-term savings, with ongoing volatility in the financial markets increasing their appeal, according to KLP Kapitalforvaltning head of funds, Elisabeth Tunli Moe.

Tunli Moe noted that US tariffs, new trade policies, and fluctuations in currency had made many people fear for their savings.

“It is understandable that people may be worried, but now is the time to stay calm,” she stated.

“The stock market fluctuates, but historically we see that if you have a long-term perspective, the return will be better than if you have the money in the bank.”

The ongoing uncertainty meant it was wise to choose index funds if savers are not active stock or fund investors, Tunli Moe argued, as it was difficult to find funds that outperform indexes over time.

While index funds will never top the annual ranking of the best equity funds, Tunli Moe noted that this was a “given”.

“Index funds are supposed to provide the market's average return minus a small cost,” she continued.

“Therefore, there will always be a number of active funds that beat the index in a single year. The problem is that it is almost impossible to know in advance which funds will achieve this.”

Tunli Moe highlighted the diversification provided by index funds, with KLP AksjeGlobal Indeks, for example, owning shares in nearly 1,300 companies.

Shares listed in the US make up around 70 per cent of the KLP AksjeGlobal Index, although, as much of the financial uncertainty was linked to the US authorities, this had led to some being unsure whether it was prudent to invest in global index funds.

“At the same time, one must consider how American the ‘American’ companies really are, since much of their business is outside the United States,” Tunli Moe said.

“If you are among those who are sceptical about large US exposure, there is a simple and cheap solution. In addition, buy something in emerging markets and/or in a regional index fund.”

In Norway, active funds have traditionally outperformed index funds, and while this indicated active funds were better for exposure to Norwegian assets, the risk in a Norwegian equity fund was higher.

Furthermore, Tunli Moe noted that, if savers want to invest in tech industries, broad index funds would be a worse fit.

“Technology has been popular, but in recent months share prices in this sector have fallen significantly,” she warned.

“Green energy was popular four or five years ago, but has now become unpopular in the financial markets. Market sentiment can change quickly, and then it is wise to have a good diversification of investments.”

---