Index funds boom in popularity, but active management still has a role
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Index funds have surged in popularity due to their low costs and consistent outperformance compared to actively managed funds. Assets in passive index funds now exceed active funds.
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If index funds captured 100% of the market, there could be negative impacts on price discovery and asset valuation, especially for IPOs and private companies.
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However, it's unlikely index funds will ever fully dominate as there will always be opportunities for active management and arbitrage that prevent a market freeze.
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Index funds remain a good option for retirement savers due to lower fees and more stability compared to active funds.
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As index funds grow, more opportunities may emerge for savvy active investors to profit from pricing discrepancies and individual stock research.