Contributor: Duncan Burns | Vanguard

From a standing start in 1998, index funds now account for $700 billion of assets under management in Australia. That's mainly to do with cost and performance.

Here’s how a broadly diversified portfolio with international exposure ultimately produces more stable returns.

While adopting a tactical asset allocation might seem tempting during bouts of heightened volatility, the timing and skill required to perfectly execute a portfolio shift is near impossible. Sticking to a strategic asset allocation however is likely to yield better returns.