Like many Americans (indeed, a growing number of them), Andrew Lipstein is a passive investor. Broadly speaking, this type of investing is “a buy-and-hold strategy that uses index (or similar) funds to match the performance of the overall market,” Lipstein writes in a new cover story. Harper’sIn my case, I make a living by periodically putting money into a “set it and forget it” portfolio. I don’t try to assess the value of certain stocks and invest accordingly (the “buy low, sell high” mantra of “active” investing), nor do I pay large fees to fund managers to do it for me. After all, such fund managers have a historically poor track record compared to passive, low-cost index funds. Does all that sound great? Not so when you consider the question posed in the article’s headline: “Does the Rise of Index Funds Mean Disaster?”
In his article, Lipstein delves into the complex factors that are at play in that question, speaking with well-known fund manager Michael Green, one of the most prominent pessimists on index funds. One big concern is the incredibly rapid rise of passive investing over the past two decades. Without active investors, there can be no passive investing, but if passive investors outnumber active investors, this could distort the true value of the market and lead to even more volatile fluctuations, Lipstein writes. The word “bubble” is definitely used. To be clear, Lipstein is not changing his investment strategy or encouraging his readers to do the same, he says. marketBut he wants to remind passive investors that supposedly safe index funds are anything but safe. Read Harper’s full story(Read this or any other longer summary.)
