Posted 2/29/2024, 10:40:24 AM
Passive Funds Now Dominate Stock Market, Potentially Inflating Values and Concentrating Risk
- Passive investing funds now dominate the stock market, raising worries they are inflating stock values
- The 5 biggest US companies make up 25% of the S&P 500 index, the highest concentration since the "nifty fifty" bubble
- Passive funds can influence prices by aligning investments with indexes rather than stock fundamentals
- Active managers are declining due to high fees and difficulty beating efficient markets
- Unless market concentration decreases, passive funds will likely maintain dominance over active pickers