In a world where bank savings earn interest that inflation eats for breakfast and pension funds sound like something you’ll need in 40 years — index funds are becoming increasingly popular among young people. And for good reason.
What exactly is an index fund?
An index fund is a type of investment fund that doesn’t try to “beat the market.” Instead, it simply tracks it.
Concretely: if you invest in a fund tracking the S&P 500 (index of the 500 largest US companies), your money is invested in all those companies at once — Apple, Microsoft, Google, Amazon, Nvidia… You’re investing in the entire market, not individual stocks.
Key difference vs. traditional (“active”) funds:
- Active fund — a fund manager picks stocks, tries to guess what will grow, charges high fees (2-3% annually)
- Index (passive) fund — a robot tracks the index, no guessing, minimal fees (0.03-0.5% annually)
This idea was popularized by the legendary John Bogle, founder of Vanguard, who launched the first index fund for the general public in 1975. They laughed at him back then. Today, Vanguard manages over $8 trillion. Who’s laughing now…
Why young people worldwide choose index funds
According to J.P. Morgan’s 2026 research, 69% of Gen Z investors (18-27) and 63% of millennials plan to prioritize flexible investments (like index funds) over traditional pension funds.
Three key reasons:
- Lower fees — you’re not paying a manager to “actively manage.” The difference of 2% annually over 30 years means tens of thousands of euros difference.
- Diversification — you’re not betting on one stock or one company. You’re investing in hundreds or thousands of companies.
- Simplicity — you don’t need to be a financial analyst. Buy an index fund and let it work.
Index funds vs. third pension pillar
The third pension pillar (voluntary pension savings) has one huge advantage — the state adds 15% to your contributions. That’s hard to beat.
On the other hand, pension funds in Croatia average 4-6% annual returns, while S&P 500 index funds historically deliver around ~10% annually (before inflation).
The smartest strategy? Combination.
- Contribute to the III pillar — get free 15% from the state
- Invest remaining savings in index funds (via domestic or international brokers)
How to invest in index funds from Croatia
Good news: you can. Here’s how:
1. Domestic index funds
Croatia already has index funds. E.g., OTP Indeksni fond (OTP Invest) tracks the Croatian stock market. You can start with as little as 20-50 € per month. Downside: focused only on Croatia, a very narrow market.
2. International brokers (recommended)
The best way to invest in global index funds is through international brokers:
- Interactive Brokers — world’s largest broker, low fees, huge ETF selection
- Trading 212 — simple, mobile-friendly, zero commissions on many ETFs
- Revolut — easiest to start, but fees are somewhat higher
Popular global ETFs you can buy:
- VWCE (Vanguard FTSE All-World) — over 4000 companies worldwide, fee just 0.22%
- SPYL (SPDR S&P 500) — tracks S&P 500, fee just 0.03%
- EUNL (iShares Core MSCI World) — developed markets, fee 0.20%
3. Taxes — must read!
When you sell ETF shares and make a capital gain, Croatia charges 12% capital gains tax (plus surtax depending on your city).
Good news: if you hold shares for more than 2 years, you pay zero tax on gains. That’s a legal incentive for long-term investing — exactly what index funds are about.
Real example: 25-year-old investing 100 € monthly
Let’s say Mark, 25, decides to invest 100 € per month in VWCE (global index fund).
At an average 7% annual return (conservative estimate for global index):
- 10 years (age 35): ~17,500 € invested → ~17,900 € value
- 20 years (age 45): ~35,000 € invested → ~52,800 € value
- 35 years (age 60): ~42,000 € invested → ~166,000 € value
For comparison: if Mark put the same 100 €/month in a savings account with 1% interest, after 35 years he’d have ~50,000 €. A difference of 116,000 €.
Conclusion: it’s not if, but when you start
Index funds aren’t a “get rich quick” scheme. They’re boring. That’s exactly why they work. No need to watch the news, no need to check charts daily. Buy and forget for 20 years.
If you’re young and have 50 € extra per month — that’s 50 € working for you instead of sitting in an account losing value.
They figured this out abroad long ago. Time for us to catch up. 🚀
Disclaimer: This is not financial advice. Always consult a financial advisor before investing. Investing carries risk and the possibility of losing part or all of your investment.