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This is false. The weights of the largest constituents of the index are set by active traders, not passive investors.

• walshemj 9y ago
  Did you not read the line with "increasing fund flows from actively managed to passive index funds" Buying the index forces you to by all stocks in the index good and bad over and undervalued. Some of my active funds in the UK got out of banks before the crash a FSTE 100 tracker could not - so some one investing the same amount in a tracker is almost never going to catch up to that active fund.
  • tanderson92 9y ago
    I did read it. This statement is false: "but it does cause problems with being over concentrated in stocks which will cause more losses when the down turn happens." Total market index funds do not overweight or overconcentrate stocks. As I correctly stated, the weight of the stock in the index and in the passive fund are set by the consensus of all active traders.
    • walshemj 9y ago
      Someone who is blindly putting all there investments into an index is not an active trader - its when those investors panic and pull investments that the problem will occur - bit of a problem for those with FANG options as well.
      • tanderson92 9y ago
        So you agree that total market index funds do not overconcentrate stocks relative the market consensus? You stated the opposite in your initial post.
        • walshemj 9y ago
          The market consensus is wrong in this case - this is the obvious inference.