The Index Fund 'Tipping Point'

Index funds are mainstream. At year end 2021 more of the US stock market was owned by index funds than by actively managed funds. Funds only own about 30% of the US market, but taking a broader view of institutional investors, assets have been shifting toward more passive institutions.

Index investing as a theoretically optimal investment strategy works best in an efficient market, but if everyone turns into a passive index investor the market can’t be efficient. This is commonly known as the Grossman-Stiglitz Paradox, and it has some people raising the alarm about a tipping point for market efficiency.

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[rob]

Wow I've heard people say "this market is so bad it's making me pull my hair out", but never have seen "this market is so bad it's making me grow hair back" 😂😂

[daverichardhadley]

"Hopefully that feeds your index investing confirmation bias"
Ben knows his audience. 😆

[spector]

As a bald man I feel absolutely BETRAYED

[Rizhiy]

This is exactly what always confused me about traders/active investors saying you shouldn't invest in index funds. Surely if index funds make market less efficient, they would want that, because they will have higher profits from exploiting the inefficiencies.

[EpicFinance]

Exactly! and even if the "tipping point" occurs and money starts to flow away from the index funds into actively managed funds, it would eventually "tip" the other way with the opportunity going back to passive investing.

[hasben]

Inflation done got a hold of Ben☠️☠️. He let his hair grow out crazzy☹️☹️🤣

[robinimpey]

My should be at peace with our love of index investing. Thanks hippy Ben! ✌️

[jaimehurtado]

Thank you, Ben. You are the absolute best source of information, period.

[pfeilspitze]

Never heard of your channel before, but great video! Nice to see one with actual citations, since *so* many videos are from people selling their active management and are completely unsourced.

[dainiu]

The day Elon Musk talks about putting 69% of his wealth into an Index Fund with 420 stocks, is when the tipping point has been crossed.

[michaelpescatore]

What I have learned is never stop buying the index...idc if it pops, idk if it goes down 70% just keep buying the index. People who say otherwise typically are trying to sell you something...

[DJJeri]

I love that you include DOIs of the papers you cite in your recent videos.

[susymay]

Hidden gem channel! 💎

This guy really knows his stuff!

[arielmarks]

I gonna guess all the comments are gonna be about his hair.🤣
Great video Ben!

[JoshKablack]

Ben's long haired hippy twin makes some great points here.

[zdenek]

Weird to see a new guy on this channel but he's still good.

[Albert-PhotonChem]

Thanks a lot, Ben!! As usual an extraordinary piece of information.

[dav]

Very interesting arguments against this famous 'too much passive investing'.
Thank you so much Ben.

[EastofVictoriaPark]

I don't worry about this point because rich people hold way too much of the world's wealth. Rich people will never want market returns. If we hit this tipping point it would probably be in an environment that that was no longer the case and our world would be a whole lot better. In theory, I would want us to hit this tipping point. It would be great if more people could participate in wealth accumulation than do today.

[ErriNight]

Dude i trade a hedge fund daily. I have had this feeling and talked to people about this for a while. Well said borther, bravo.