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The concept of “passive investment” is puzzling to me. Presumably we buy stock to support good, viable companies in return for some profit on investment. Passiv
by strogonoff 6y ago
The concept of “passive investment” is puzzling to me. Presumably we buy stock to support good, viable companies in return for some profit on investment. Passive appears to remove the element of scrutiny from investment. It could make sense if there were no bad actors that game the books and generally make their business models seem sound despite reality.
- qqii 6y agoThis argument only seems to hold if everyone was a passive investor. Also not all investors can take the same amount of risk, which naturally results in passive investors.
- deleted 6y ago[deleted]
- nicbou 6y agoActive investors don't support good, viable companies. They can be misled, or just join pump and dumps.
- skybrian 6y agoA problem is that you can’t necessarily tell the big winners in advance, and if you don’t diversify enough, you will likely miss their big gains, unless you’re paying very close attention. Avoiding bad companies seems like it would be easier, but if everyone knows they’re bad then they wouldn’t get much weight anyway, and maybe you’re wrong. But I’m just explaining why it may be harder than it seems to beat an index, not saying it’s impossible.
- qqii 6y agoEven if you could tell a big winner in advance, the time volatility in return is still a risk factor.
- deleted 6y ago[deleted]
- AnimalMuppet 6y agoPassive moves the element of scrutiny. Instead of the individual, S&P (or whoever runs the index) does the scrutiny. Well, who's better equipped to do it, me or S&P? Sure, S&P will make mistakes. I would probably make more of them, though.