Ask The Compound

Is There a Passive Investing Bubble?

Feb 26, 2025
Discover the potential pitfalls of passive investing and the implications of index funds and ETFs on market stability. Explore the challenges institutional investors face, from asset allocation to navigating investment committees. Hear insights on homeownership decisions in a high-cost environment and strategies for recession-proofing your 401k. Plus, consider the financial wisdom of restoring a car with savings. It's a thought-provoking exploration of modern investment dilemmas!
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INSIGHT

Index Funds and Market Valuation

  • Index funds don't prop up biggest stocks, active managers control market weights.
  • Turnover at the top of the S&P 500 disproves the bubble theory.
ANECDOTE

S&P 500 Turnover

  • NVIDIA wasn't in the S&P 500 top 10 in 2020, now it's near the top.
  • Only six of the top 20 S&P 500 stocks from 2000 remain in 2024.
ADVICE

Navigating Investment Committees

  • When joining investment committees, build relationships behind the scenes.
  • Document everything for better future decisions and accountability.
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