Index-Investing Critic Takes Aim, Fires, Misses
New arguments against low-cost, passive investing are no better than the old ones.
Dare to bet against him?
Photographer: Ken Cedeno/Bloomberg
During the past 40 years, low-cost indexing has risen from an abstract financial theory with very few takers to a juggernaut sucking up most of the new money flowing into equity investments. BlackRock Inc., Vanguard Group Inc. and State Street Corp.,1 the top three indexers, collectively own more than 10 percent of every company in the U.S. They own lots of overseas stakes as well.
This shift represents an existential threat to numerous parts of the financial services industry: Once investors decide to simply “buy the market,” many types of financial jobs are no longer necessary, from human traders to newsletter writers to various active management strategies.