how is that any different to any other fund including managed funds, or any other investment ? it does depend on how much of that 5% figure is capital growth and how much is dividends. let's say for example that the breakdown is 4% in dividends and 1% in capital growth. therefore you'll be paid 4% this year which you can have deposited into your bank account or choose to have automatically reinvested into more units in the fund. don't ignore the magic of compounding interest. the 1% capital growth can only be accessed by selling your units. the same goes with an investment property or a term deposit or units in Perpetual Australian share fund. you reap capital growth profits when you sell.
the main advantage of index funds is they charge much lower fees than actively managed funds, and often actively managed funds fail to match or beat the index. for example Betashares A200 index fund ( ASX listed ) charges only 0.07% per annum, whereas most actively managed funds for retail investors charge well over 1% per annum. worrying about market movements.....unless you are an experienced investor or trader you shouldn't be trying to time markets as even the experts frequently get it wrong. amateurs are notorious for buying when markets are expensive and selling when they have gone down, the very opposite of good investing ( buy low sell high, not buy high, sell low ). accept the fact that as a long term investment, equities do very well averaging about 10% per annum in the very long run ( including dividends ) plus even when markets go down, Aussie equities still pay out dividends consistently. if you have the skills for buying / selling / timing markets, go for it. the rewards can be far higher than 10%, as shown by CSL : an initial $10K investment in 1994 would now be worth $1.3 million with $140K dividends along the way if you can't stomach volatility and it keeps you awake at night, don't invest too much money or invest elsewhere.
