Investing in Stocks Against the Indexing Goliath

Föhrenbergkreis Finanzwirtschaft

Date: 04-04-2015
Source: The Wall Street Journal

Have index funds become so popular that they are ruining the financial markets for everyone else?

These autopilot portfolios, which buy and hold essentially all the securities in a market index without even trying to find the best and avoid the worst, have become the giants of the market. Index funds accounted for 35% of total assets in all stock mutual funds and exchange-traded funds at the end of 2014, up from 25% in 2010, according to Empirical Research Partners, a firm in New York.

In the past five years, estimates the investment-research firm Morningstar, investors have pulled $73.6 billion out of “active” U.S. stock funds that seek to beat the market and added $208.8 billion to index funds that seek only to match it.

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