Passive investments such as ETFs and Mutual Funds have become extremely popular these days. 37-38% of the US stocks are held by passive investors compared to 3% in the early 2000s. I have seen people investing a major chunk of their hard earned money in ETFs - VOO, VTI, SPY etc.. The index stocks can easily become inflated and create a bubble. Every guy in YouTube is asking people to invest in index funds to become a millionaire. Warren buffet too (Even though he made most of his fortune through active investing). What do you think of this? Are you comfortable investing in index funds? What percent of your portfolio is in index funds? Here’s a video of what could happen: https://youtu.be/0bqDg_ZriOw TC: 220 #personalfinance #investments #indexfunds #money
Index fund bubble is not real and balanced out by hedge funds
Can you use some data or statistics to prove this point? See the numbers!
sp500 has 500 largest companies out of around 4k. It’s like 70-80% of the total market in size. Why wouldn’t it warrant that much of the total invested money?
Could the average person find an easier or more assured way to build long term wealth?
Business or real estate?
Reasearch and pick some active funds. Buy REITS, gold, hold some debt.
I think the idea is, index funds rise and fall with the stock market. So if the index funds go south it is a reflection of the stock market itself. Also the stocks in the index funds are constantly changing to reflect their performance. So it is still the safest Long term investment IMO
It's mainly due to the nature of people with their money. If you can not be patient to keep your money in an investment; then just do the set it and forget the approach of index funds. You get a lot of benefits with little risk. Sure, you mention if index funds pop...at that point, all investors will be impacted...so no need to worry. But, for the average person, being on top of your money, trading, research, and finding cheap stocks is too much work. Also, it's been proven countless times that on average you can not time the market, and stock picking is basically that. I am guilty of this, too.
It's literally the best investment historically for the average person. And why are you bringing up warren buffets active investing? Are you going to spend 10 hours a day looking at company balances sheets?
I’m asking for your thoughts on this idea. I know why people invest in index funds and I also invest a heavy chunk in index funds. I did not say I am going to spend 10 hours a day looking at company balance sheets. I am here to listen to other people to get a different perspective on this.
Thoughts are that it is a good idea
Nothing is stopping you from buying each stock individually and matching it against the index like s&p500 but you have to actively manage it and remove or add stocks as the actual index adds and removes stocks. If you don't then it's a self managed portfolio and you have to actively trade it or be another stock market gambler.
I'm not Warren Buffett. Just because one of the most successful investors of all time, if not THE most successful investor of all time, made money active investing, doesn't mean I can do it
What is the better/safer alternative if someone still wants to invest in the stock market? Nothing beats the index funds in that sense.
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I don’t have the time or the want to actively trade, hence index funds.