Maybe someday there could be too many passive investors, but the metric shouldn't be proportion of the market _owned_, but the proportion of _trades_. Passive investors trade many times less frequently, so active investors are still disproportionately doing price discovery (which does the price discovery we so happily leech off). If inefficiencies are systematically introduced by passive investors, eventually the so-shrewd shrewd active players will eat our lunch. For a season, anyway. And then, shocker, the problem would be solved, and passive would be efficient again. Without us lifting a finger. Rinse and repeat. The fretting is much too early.
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Maybe someday there could be too many passive investors, but the metric shouldn't be proportion of the market _owned_, but the proportion of _trades_. Passive investors trade many times less frequently, so active investors are still disproportionately doing price discovery (which does the price discovery we so happily leech off). If inefficiencies are systematically introduced by passive investors, eventually the so-shrewd shrewd active players will eat our lunch. For a season, anyway. And then, shocker, the problem would be solved, and passive would be efficient again. Without us lifting a finger. Rinse and repeat. The fretting is much too early.
Post: Index Fund Bubble
Link to comment from December 6, 2025