What Happens If Everyone Buys Index Funds?

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0:00 - What are Index Funds and How are They Priced?
3:28 - Every Buyer Needs A Seller..
4:41 - Are Index Funds Causing a Bubble?
7:15 - What Really Moves the Stock Market
10:26 - Active Managers Performance vs Passive - Why People are choosing Index Funds
12:42 - The Biggest Reason That Index Funds are NOT the problem

[anthonyjanes]

That will never happen, there are lots of people out there who think they can outperform the market, I was one of them once upon a time, I realised the error of my ways.

[premiumbr]

Everybody should go for stock picking, so I can make money with my index fund 🙂

[dojpzgr]

There are lots of index fund holders that are selling, ones who are rebalancing, ones that de-risking because of retirement, ones that want to diversify, and those that just want to sell to live on the proceeds ...
So lots of sellers and buyers. I don't think there is going to be any issues with just sticking to index funds.
Just my opinion...

[nickmichie]

I'm 100% index funds. Can't be bothered with picking stocks. Happy to just set and forget :)

[kukuc]

There was that saying: There are 3 ways to beat everyone else in the stock market: Be smarter, be faster or cheat. I am definitely not faster than a high frequency trading algo, certainly not smarter than everyone else, and I won't cheat, so indexes it is.

[thelammas]

At the extreme, if the majority of people will be buying funds without evaluating them. That would open up huge valuation mistakes, which would make it possible for active managers to make a decent living again.

[bukki]

I have over $200k ready to be invested, however I am having trouble trying to find out what investments would be best during this present economy. Heard index funds and ETFs provide diversified stock market exposure while spreading risk. How true?

[fakealias]

We also forget the one of the major buyers/sellers are the companies themselves with buybacks, stock comp, and dilution that can actively keep companies fairly valued.

[KirstenBayes]

Paid off my mortgage with index funds. Worth remembering in the UK that you can get these as tax-free ISAs up to a certain level. After a current account, then rainy day fund in a quick access deposit account, investing in index funds up to the ISA limit is a decent third account. But as they say, time in the market beats timing the market: stocks are long term things.

[DarkoFitCoach]

100% vanguard sp500 here buddy. Too smart to know i cant and dont want to pick out stocks and that even the best of fund managers cant do it and i know i aint peter lynch

[bigboldbicycle]

Institutional investors have the most influence over price movements, and they will never be buying index funds. Plus was you say in the video, everyone else will always dabble in picking stocks, so I agree there will always be active investors out there.

[robertobomfin]

Nice video. I would just complement it: my understanding is that as index funds grow comparatively to individual stock buyers, the market becomes more predictable because there are fewer one-to-one transactions. That means that the reward for the successful individual stock buyers will increase while the index fund return will decrease comparatively to one another. So, there is a sweet spot where both methods operate in some sort of equilibrium. For this reason, there will be always an incentive for active funds to exist.

[philiplythgoe]

I have been trading ETF's as well as shares. Buy different funds within the same sector off different providers, each provider will have different XD days so you can chase the divs, you will always be invested in more or less the same comps all of the time ....

[Simon-vogi]

I am invested in index and stocks. My Nvidia purchase a few years ago has more than made up for any wrong stock I picked.

[Brodzik-kznt]

If everyone bought index funds, it would simply turn into social security or universal basic income.

[deep]

Very simple explanation of a complex sounding topic

[tweenty]

A very comprehensive way of explaining. It made a lot of sense to me with your real life examples. Thanks for making this video.

[HichigoShirosaki]

If passive funds were the only things in the market, there would still be buying and selling, just not individual stocks for people. That's really what etfs are. They are just a group of stocks. A group can be literally any combination of the overall market using any metric imaginable. For example, there can be a Letter A index that just has all the companies starting with the letter A that are all equally weighted. Because of that, though, passive funds effectively have to trade stocks themselves. So even if people aren't directly trading stocks, they actually are doing so. It would not matter if there were only passive funds even if people only ever bought and never sold, because in order to keep their weights and stay diversified, the funds would have to trade between themselves and it can be automated.

Additionally, funds are bought and sold like any stock and there will always be people selling even when it's not market related reasons. In this way, passive funds act like a grouping but also a regular stock of any company. That's why funds in general don't matter. All they do is add an additional layer of ambiguity to how much is being invested in a company because all of it can be done behind the scenes.

[isaacakers]

I really appreciated this video. I don't watch all your videos, just cause time. But out off all the finance channels I follow, I really appreciate when I watch yours. You have such an honest humility that isn't common in this space. I hope the world doesn't take that from you someday when you have millions of subscribers.
I think your book review videos were some of my favorite. I've bought and read at least 5 that you suggested, and as you stated, were worth far more value than the tiny price tag to purchase them.

I'd love to see more book reviews and recommendations in the future. Keep being you.

Sincerely,
A fan

[creatingbalancefinance]

Brilliant video Toby! Your editing is so good! I’ve got a lot to learn 😂 wishing you all the continued success with your channel 👍