We’re being bombarded on almost a daily basis by negative stories about the rise of low-cost passive investing.
These are the types of story I’m referring to: it’s grown too big, it’s inflating the prices of the biggest stocks, it’s making markets less efficient, it’s causing the misallocation of capital, it’s undermining corporate governance, and it’s all going to go badly wrong when the bear market finally comes.
Heck, passive investing has even been called “worse than Marxism” and accused of undermining the capitalist system.
I was recently invited by Trustnet magazine to respond to some of these claims.
Trustnet is a longtime champion of active fund management, and the very fact that it’s devoted most of its October issue to passive investing and made my article the cover story is a sign of progress.
The financial media has a vital role to play in helping investors to achieve better outcomes, and the gradual change in attitudes towards indexing among my fellow UK journalists is hugely encouraging.
What’s noticeable about almost all of these scare stories about passive investing is that they emanate from the active management industry, or those connected to it — from people, in short, whose livelihoods are threatened by its growing popularity.
Thank you, Trustnet, for the chance to put the consumer’s side of the story.
You can read my article here: