[neilk]

I’m know I’m a dummy when it comes to economics, and an investor in index funds because of that.

But it strikes me that index funds are parasitical in a way and depend on price signals from active investors.

Some people say that it’s ok, the situation is self-correcting.

But what if the smart active money is active in places we can’t see in the public markets? Again, I’m a dummy, but I believe a lot of investment is happening privately these days.

[fountainofage]

Private investment is absolutely where the money is these days. Look at how the media claims an IPO that doesn't pop 30% or more on day one is a "failure." No one who actually contributed to that company's value benefits from that pop, and best case scenario is really to either have the IPO be flat or even go down a little. But those elite that buy their way to the front of the line demand to have that 30% pop for contributing nothing.

I'll just point out there's the argument about market makers and underwriting and blah blah blah. If that's such an issue just price that into the underwriter fees to begin with. No reason the public markets should lose out on a 30% gain to people that didn't actually take a risk and invest early in the company, and only intend to hold the stock for 8 hours at most.

[perardi]

You are not a dummy. Over the past 30 years, index funds have outperformed active management, especially when you consider the fees.

You are a ”dummy” in the sense you don’t have perfect information awareness on every possibly tailwind or headwind that could impact a particular stock. But everyone is a dummy in that sense.

[davidw]

> But everyone is a dummy in that sense.

And even honest people well versed in economics will tell you that they are too.