Editor's Note
By Journal of Indexes Staff

Rarely has retirement investing gotten so much press. And index investing sits squarely on the front lines of the Bush Administration's bold plan to overhaul Social Security. It's obvious that something needs to be done. The question
that has played out increasingly in the public eye is whether moving toward an "ownership society" is the way to do it. Early on, anyway, it appears that Bush's plan may go the way of Hillary's health care proposal.

I will leave the judgment to you and the public, and the analysis to David Blitzer, the chairman of the S&P 500 Index Committee (who leads off this issue with his views on the matter) and somewhat more cheekily to the resident Curmudgeon, Brad Zigler, who wraps up the issue with comic swipes at the plan and (yes) some actual analysis. It is clearly a topic of huge significance both for our markets and the broader economy, so we're having our say.

I noticed recently that Barclays Global Investors (who manage iShares) have been promoting the fact that they now have the "the third-fastest growing mutual fund firm in the U.S." When I saw that, my first thought was, "Who's first and second?" According to Financial Research Corporation, the answer for 2004-in terms of net inflows-was American Funds (American Funds?) and Vanguard. Coming in fourth and fifth were Dodge & Cox and State Street Global Advisors (SSgA).

What do all these firms have in common? Low fees. Intuitively … for index investors, anyway … you might expect big money to go where the low fees are. But this has not always been true, particularly in the retail sector.

It all goes to say that apparently John Bogle is right: Cost matters (see his column in this issue). Investors are beginning to realize this and are demanding better pricing competition, which, let's be frank, directly translates into better investment performance. Still, with all these positive trends (even Fidelity has now made its ten basis point index funds permanent, for goodness sakes), one can still argue (and Bogle does) that the soaring pool of index assets should force expense ratios down further yet, even at our beloved Vanguard, BGI and
SSgA. From the investor point of view, things are clearly heading in the right direction.

We have a fine issue on tap for you within our bookend coverage of the Social Security debate. Gary Gastineau digs into the myths and realities of ETF and traditional index fund tax efficiencies, and Joe Benning of the CBOT looks at fixed-income indexes. Also included is a comprehensive hedge fund index analysis and a nice piece on the positive effect of international diversification in helping to ensure that you'll meet draw-down targets at retirement. Top this all off with Oscar Silver's spring revelation, and the aforementioned Bogle piece, and you've got an indexer's dream issue.

Enjoy-and keep those submissions coming. We enjoy almost every one. And even if we can't print them all in the Journal of Indexes, they can be published on www.indexuniverse.com.

Jim Wiandt

Editor

Journal of Indexes