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Theres enough people actively trading that the market is relatively efficient. You are correct that if index funds reached 100% it would be crazy, but index fun
by conanbatt 7y ago
Theres enough people actively trading that the market is relatively efficient. You are correct that if index funds reached 100% it would be crazy, but index funds would start performing worse than the market when they got to 99%, which means more would go to actively managed, til 98%, etc etc.
There is definitely going to be a balance point where active > passive. And we might know about it 5, 10 years from now, even if it already happened.
- OscarCunningham 7y ago> but index funds would start performing worse than the market when they got to 99% They can't perform worse than the market, because they own shares in exactly the same proportion as the market.
- rightbyte 7y agoThey should perform worse than the market becouse they own crasching stocks and don't own stocks that climb into eg F500 to replace the crashing one.. The only way to performe at market average is to own a proportional share of all stocks and have no transaction costs.
- conanbatt 7y agoIndex fund replicate indexes, they are not the indexes.