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Aren't we already in an index fund bubble? How can the stock market stomach all of that liquidity? Don't the share prices go up beyond the value of the compani
by toohotatopic 7y ago
Aren't we already in an index fund bubble? How can the stock market stomach all of that liquidity? Don't the share prices go up beyond the value of the companies?
- pm90 7y agoThere is a large amount of wealth invested in index funds but that doesn’t mean it’s a bubble. By its definition index funds are amortizing their investments to mitigate risk, this is opposite of a bubble.
- toohotatopic 7y agoI don't understand what you mean with 'amortize'. Doesn't it mean writing off the value of something? Why would you write off the value of an index fund investment? And how does that mitigate risk? I guess you mean that they spread their investment among all companies that belong to an index. But that doesn't solve the problem of too much liquidity.
- ethbro 7y agoDepends on the index fund. Weighting seems surprisingly important, yet almost never mentioned by index proponents. Especially as their total cap comes to represent a broader proportion of the total market.