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Overindexing of the public market is certainly a potential issue for consumers of investment services. That said, if and when it becomes an issue, it likely won
by kornish 9y ago
Overindexing of the public market is certainly a potential issue for consumers of investment services. That said, if and when it becomes an issue, it likely won't be an issue for very long. Should index funds start to consistently underperform high-management-fee actively managed portfolios, investors will simply move funds there over time.
Of course, that's little consolation for those who lose out during the correction period - so your point stands. But AFAIK we're well below the danger zone for too much public market capital being passively indexed.
- cbanek 9y agoI agree we're not to over indexing in the US, but I think people really have to keep watching the central banks, especially Japan and the BOJ [1]. While the US federal reserve doesn't buy stocks, other central banks do, and a lot of them use indexing/ETFs. The swiss national bank also has a fair amount of US stock holdings.[2] Given how the central banks act, this affects the currency markets and interest rates. (1) https://asia.nikkei.com/Markets/Equities/Japan-s-central-bank-nearly-doubles-ETF-holdings-in-one-year https://asia.nikkei.com/Markets/Equities/Japan-s-central-ban... (2) http://www.businessinsider.com/swiss-national-bank-owns-80-billion-us-stocks-2017-6 http://www.businessinsider.com/swiss-national-bank-owns-80-b...