Barry Ritholtz, Columnist

Index Funds Are Going to Be Just Fine

Inflows have slowed? Actively managed funds would like to have that problem.

July 18, 2018 at 5:33 PM UTC

Barry Ritholtz is a former Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

This is where the analogy ends.
Photograph: DEA/S. Vannini/De Agostini Editorial/Getty Images

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If something cannot go on forever, well then, it will eventually stop. So said economist Herbert Stein when he made this obvious but insightful observation. Trees do not grow to the sky, and matters that are truly unsustainable eventually come to an end.

The most recent example of something that can’t go on forever has been the inflows into low-cost, passive index funds, primarily to the detriment of higher-cost, actively managed funds. As the Wall Street Journal reported: