Excess Returns What the Rise of Passive Investing Means for Your Portfolio | Special Guest: Dave Nadig
11 snips
Dec 2, 2024 
In this discussion, finance expert Dave Nadig dives into the rise of passive investing and its effects on the markets. He explores why active strategies have faltered, leading to increased popularity in passive funds. The conversation delves into how index fund flows impact market dynamics and the potential risks of passive investing on stability. Nadig also addresses generational wealth transfers and the influence of investor behavior on market strategies, providing valuable insights for both individual and institutional investors.
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The Rise of Passive
- Active investing's consistently poor performance led to the rise of passive strategies.
- Increased access to information and ease of trading empowered investors to switch to passive.
Passive Isn't Passive
- Passive investors aren't truly passive; their consistent inflows impact market dynamics and security pricing.
- This challenges the traditional view of passive investing and its assumed lack of market influence.
The Counterargument
- Rick Ferri argues that indexing doesn't distort markets because it buys everything proportionally.
- He claims the 5% daily trading volume from index funds is too small to significantly impact prices.