The Double Edged Sword of Passive Investing
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, US, on Monday, Sept. 22, 2025. Wall Street traders left stocks hovering near all-time highs amid calls for a break after a $15 trillion rally from April lows
Photographer: Michael Nagle/BloombergThis article is for subscribers only.
In recent years, US investors have increasingly leaned into a low-fee high-return strategy to fund investment accounts called passive investing. The allure isn't just avoiding the costs of active fund management, it's also the fact that active managers have underperformed the market.
What many investors understand is that if you can't beat the market, you can simply 'buy the market.' This change in market structure has a few consequences.