Jump to content
bWise Forums

Are Index Funds Evil ?

Recommended Posts

If you’re like me, you’ve cheered the decades-long rise of index funds—investment vehicles that seem (these days) to be a rare case of financial innovation that actually helps regular people. By trying merely to match the market, not beat it—investing passively in stocks that mimic a published market index, like the S&P 500—they’re able to offer both low fees and peace of mind for people not inclined to try to pick which stocks to buy and sell.



Share this post

Link to post
Share on other sites

Interesting read. Much better than anti-index folks calling us Nazis.

if investors own a slice of every firm, they will make more money if firms compete less and collectively raise prices, at the expense of consumers. Knowing this, the firms’ managers will de-emphasize competition and behave more cooperatively with one another.

  • The idea that collusion leads to higher profits/prices is nothing new.
  • I'm skeptical that Vanguard, Blackrock, etc would pressure companies to stop competing.
  • I'm skeptical that companies would mutually decide to stop competing because index funds will buy their stock regardless. I have to believe "active" investment would kick in and appeal to greed within those companies. I also wonder what role individual people have, a lot of those guys are hyper competitive and ego-driven.
  • What about the age old advice for diversification? For those who don't buy index funds, were they ignoring this wisdom and going all in on Microsoft while ignoring Apple?
  • What about laws and enforcement of anti-competitive business practices?
  • If we got to some point in the future and knew for a fact index funds were "bad", I wonder what that would mean for active funds. I can imagine a world were investors demand rock bottom costs from active management. I can also imagine a world were investors demand diversified portfolios from their active management and isn't that the same "problem"?

Share this post

Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now