To illustrate to you why you cannot trust the indices as your guide that with long term investing you would necessarily better off.
I have extracted 5 year performance on mom and pop shares but excluding dividends or any capital repayments.
Now as you can see, the ASX200 put on 18.29% over the 5 year period till yesterday. Over the same period, Telstra fell 26%, CBA and WOW down 1.66% and 1.83% respectively - so the index mask that all is good when in fact it was the CSL and COH of the world that helped the index gain. If your portfolio had those stocks, well fine and good but traditional portfolios of passive investors with Buy and Hold and dividend seeking mantra would largely be buying and holding the blue chips that they knew (that is the BHP, CBA, TLS and WOW)- they cling on to the darlings of yesteryear that were once monopolies but they have not been following or choosing to deny that structural changes and market dynamics have impacted these businesses tremendously that their share price can no longer grow as before.
Of course perhaps if one were to include dividends, the picture would be less gloomy but even with that I don't think it is good enough because one would expect blue chips to at least keep at par with the performance of the key indices.
In fact, if you had your money invested in a 5 year term deposit in 2014 with 4% compound interest. you would be better off by 21.66% today , so on Opportunity cost basis, the 5 year investments in these blue chips have not been as flash as what the indices would have suggested. This is not what mainstream would tell you. While this is not saying that term deposits can beat these stocks (they won't) as they are going to zilch soon, this is merely to show that conventional mantra on long term investing do need proper pre-qualification - and that is being in the right stock and the right period where business dynamics continue to support their growth trajectory.
While the large underperforming stocks like TLS could not be removed from the ASX200 due to size, what has happening is that the underperforming ones at the lower end of the 200 have been removed, replacing them with **stars** like APX, Magellan Financial and now more recently Promedicus (PME), ensuring that the ASX200 index continues to prosper well ahead into the years ahead, much higher than term deposit rates.
