What, Me Worry?

ActivePassiveThis article by John Mauldin takes a close look at the dramatic ascent of passive indexing and the side effects of these products. He writes that passive investing is perverting the financial markets' core economic function; the efficient capital allocation. In terms of stimulating buying interest, a company's fundamental business prospects are now much less important than its presence in (or absence from) popular indices. He says that ETFs have created an environment in which badly managed companies can still see their stock prices rise along with those of well-managed companies. Read more