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What if (hypothetically) a large majority of investors started investing into index funds? For example, an enormous amount of retail investors are won over by t
by jameslk 10y ago
What if (hypothetically) a large majority of investors started investing into index funds? For example, an enormous amount of retail investors are won over by this bet and believe passive investment in index funds will always lead to higher returns. Are there any ramifications of this situation that may cause inefficiencies where investing in hedge funds may lead to better returns over a period of decades? Should we all just dump our money into SPY and VTI now that Warren Buffett has won this bet? Or maybe Ted was just unlucky to take this bet during successive rounds of QE that pushed interest rates to historic lows and perhaps artificially turned more risky assets into the only vehicles for returns?
- mcguire 10y agoI have no strong evidence to back this up, but I believe that odds exactly why the price of the S&P500 in terms of price to earnings is so high right now.
- firebones 10y agoIf you look at where the money is moving, this is exactly right and it has already happened. Passive management is crushing the inflow numbers. Perhaps this creates opportunities, but maybe not opportunities at scale.