The Dangers of Passive Indexing

The idea of personal indexing or factor investing is potentially dangerous to the individual investor. The SEC allowed power shares to launch quantitative actively managed funds that they followed in Teledex index, which Bruce bonds from power shares helped create along with American Stock Exchange. They asked the SEC if they could launch ETFs based on these inTeledex index and they could they call it passive. And what the SEC said was, well, as long as you're following an index, then the fund can call itself a passive index fund. So that's what they started saying. We are the new type of passive index fund out there. As soon as that happened, the whole damn broke.