Are Too Many People Passive Investing?

As you know, we’re big fans of passive investing — it’s simple, low-cost, and it works. But with passive funds now making up nearly 60% of US stock funds, what has that done to the market? Could it be causing more volatility? Has it pushed company valuations too high? And what happens if everyone becomes a passive investor? Dimitri Vayanos is Professor of Finance at the London School of Economics and co-author of the award-winning paper Passive Investing and the Rise of Mega Firms.

Read Dimitri’s paper here: https://personal.lse.ac.uk/vayanos/Pa...

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This is not financial advice. The reason it’s not financial advice is because it’s not tailored to you. We explain the principles of building wealth but if you want personalised advice, it’s worth speaking to a financial advisor. As with everything financial, please do your own research. We really encourage that because no one cares more about your money than you and if you learn the basics then it will change your life.

Chapters:

00:00 - The rise of passive investors
05:18 - How has that changed the market?
11:36 - What happens when a company enters an index?
14:04 - Tide ad
15:36 - The brain drain into passive
23:19 - Has passive increased the size of the market overall?
27:37 - Vanta ad
28:30 - How do we know big firms are overvalued?
34:24 - What’s the risk to passive investors?
38:40 - Are you really passive?
40:44 - What happens if everyone turns passive?
47:03 - Haven’t indexes always been like this?
51:39 - Is this paper a warning?
54:55 - Does this change our mind?