Found this article from «the market» today in my feed
‘Is the Passive Investing Bubble Bound to Burst?’
I’d love to hear your opinions on this.
My first thought was that passive investors are not bringing «the market» or the NZZ in general a lot of money so shying people into active investing will also help them selling their product.
“What is she selling” is always the main question.
Sounds like, despite the provocative title, the critic is more aimed toward the S&P500 not being representative of the market as a whole than toward passive investing being toast. What I take out of it is to invest in total indexes, including all investable markets and small caps.
All in all, it reads like a poorly written article stating the same thing repeatedly, feeding on fear. I wouldn’t put any stock behind it.
I think passive investing is here to stay.
Stumbled upon the article this morning and found its argumentation pretty weird. The title is about passive investing, but the article then mainly talks about the concentration of the S&P 500, which are completely different topics. You can also invest passively in a less concentrated index / basket, although it is of course not clear that this will lead to better results. I think there is anyways no such thing as “completely passive” investing. The choice of the index is still an active decision that may influence the results significantly (for instance over- / underperformance of the US).
Also found it very weird that she drew a causal connection from the inclusion of Tesla in the S&P 500 and its steep increase in value. I think I saw a paper once that analyzed this in detail and found no under- or overperformance for stocks that get included in major indices. This makes sense to me, as if there were a systematic under- or overperformance, the large players would notice this and act accordingly, therefore eliminating any differences.
Betteridge’s law of headlines is still valid.