If you ever find yourself questioning the validity of all the studies indicating how terrible retail investors are at investing...read r/wallstreetbets and realize you and your index funds are still in the minority.
>and realize you and your index funds are still in the minority.
Quite the opposite. Index fund are busy eating the world alive.
If you've got massive money flowing into the top 100 in the index thanks to ETFs the smart money is on companies 101 - 120. Similar risk profiles to the top 100 but their price earnings profile hasn't been distorted yet but the wave of incoming index wave.
Passive is indeed the truth but don't swallow it wholesale...you're just buying into a top 100 self-reinforcing bubble that has no economic backing without realising it.
I'd hardly call that "eating the world alive." The only thing its eating so far is the absurd wealth management fees old school financial advisors used to make.
Also there's about 200 different indexes all slicing up the marketplace in various ways. Not every investor is buying the large cap, cap-weighted index (although most are).
Ultimately, this idea of passive "distorting" the markets just isn't true (also I'm not sure what you mean by "earnings profile"...earnings are set by consumer demand for a company's product, not investor demand for company stock). Active traders set prices, indexes simply follow the prices set by active traders. We are no where near the point where distortions would happen, and if we ever got to that point, there would be massive incentive to profit off of a easily predictable mispricing.
Quite the opposite. Index fund are busy eating the world alive.
If you've got massive money flowing into the top 100 in the index thanks to ETFs the smart money is on companies 101 - 120. Similar risk profiles to the top 100 but their price earnings profile hasn't been distorted yet but the wave of incoming index wave.
Passive is indeed the truth but don't swallow it wholesale...you're just buying into a top 100 self-reinforcing bubble that has no economic backing without realising it.