This is a warning to many passive investors in the country

Like many Americans — in fact, that number is steadily growing — Andrew Lipstein is a passive investor. Broadly speaking, this kind of investing is “a buy-and-hold strategy using index (or similar) funds to match the overall performance of the market,” Lipstein writes in the new cover story HarperIn the author’s case, he regularly puts money into a “set-it-and-forget” portfolio and gets on with his life. He’s not trying to assess the value of a particular stock and invest accordingly — the buy-low, sell-high mantra of “active” investing — and he’s not paying a fund manager big fees to do it on his behalf. After all, such fund managers have historically had a worse track record than passive, low-cost index funds. Everything sounds great, right? Until you consider the question posed in the story’s title: “Is the rise of the index fund a sign of doom?”

In his article, Lipstein gets to the bottom of the complex factors involved in that question and talks to the most prominent predictor of index funds, renowned fund manager Michael Green. One of the biggest concerns is the incredibly rapid growth in passive investing over the past two decades. Without active investors, passive investing cannot exist – but if passive investors outnumber active investors, this could distort the actual value of the market and lead to even more volatile fluctuations, Lipstein writes. The term “bubble” is the most commonly used. To be clear, Lipstein is not changing his investing strategy or encouraging readers to do so, he explains. MarketHowever, he wants to remind passive investors that their supposedly safe index funds are anything but. Harper’s full story(Or read other long-form recaps.)


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