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13 Jun 2021 14:53:42 UTC
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The Index Fund/ETF Bubble (Trouble Ahead?)
Learn how to make money in a bear market:
https://www.amazon.com/gp/product/B085X1H266

In this video, I discuss the index fund bubble that has developed over the past 40 years. Index fund investing started out as a smart way to lower fees and increase performance, but has quickly morphed into a bubble, as index investors now out-number active investors.

Without the price discovery made possible by active investors, there is no free lunch for index investors. In addition, thanks to index investors, corporate governance has suffered and marginal investment dollars are funneled to the Big Tech 5, further reinforcing their monopoly status.

The S&P 500 in particular is no longer a diversified index, but rather a highly skewed bet on Big Tech, in the face of populist movements that may seek to break them up.

The SPY and QQQ have become crowded trades, dependent on central bank money printing, and ever increasing fund flows (which may or may not be there in the future). As we would expect from a crowded trade, future performance will suffer, and there could be a mad and destructive rush for the exits at some point.

In a world of index funds, the smart active investor who is willing to actually use his/her brain has a huge advantage.

Not investment advice! Consult a financial adviser.

Michael Burry on index funds:
https://www.bloomberg.com/news/articles/2019-09-04/michael-burry-explains-why-index-funds-are-like-subprime-cdos

Jack Bogle on index funds:
https://www.wsj.com/articles/bogle-sounds-a-warning-on-index-funds-1543504551

Active investing vs. passive investing:
https://www.investopedia.com/news/active-vs-passive-investing/

Market price discovery:
https://investinganswers.com/dictionary/p/price-discovery

Passive investing:
https://en.wikipedia.org/wiki/Passive_management

Index funds:
https://en.wikipedia.org/wiki/Index_fund

Exchange-traded funds:
https://en.wikipedia.org/wiki/Exchange-traded_fund

S&P 500 index home page:
https://us.spindices.com/indices/equity/sp-500

Closet indexing:
https://www.investopedia.com/terms/c/closetindexing.asp

S&P 500 equal-weighted ETF:
https://www.invesco.com/us/financial-products/etfs/product-detail?productId=RSP

Stock index performance driven mostly by big 5 tech stocks:
https://twitter.com/LynAldenContact/status/1253467883251929089/photo/2

https://www.cnbc.com/2020/01/28/sp-500-dominated-by-apple-microsoft-alphabet-amazon-facebook.html

https://www.cnn.com/2020/02/10/investing/sp-500-tech-stocks/index.html

Corporate governance and stocks:
https://www.investopedia.com/terms/c/corporategovernance.asp

S&P 500 components by weight:
https://www.slickcharts.com/sp500

S&P 500 components by market cap:
https://www.barchart.com/stocks/indices/sp/sp500?viewName=fundamental

Total market cap of S&P 500:
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https://www.youtube.com/watch?v=b6c3NpsrFWg
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