But how to know when that equilibrium is reached? Even retrospectively how might someone spot temporary glitches where things have gone too far from looking at market prices?
We really don’t. But what we do know is that passive index investors save 0.5%-2% per year of returns by being passive, and that makes up for a lot.
You can save that same amount by buying stock yourself (subject to availability in your account, I guess some retirement accounts offer only funds)
Could, but it’s a record keeping nightmare. And buy/sell commissions/friction.
I’ll keep paying $1/3k p.a. to VTI in management fees.
If you think the market is crazy because of mindless investing, you go and put your money on the clear winners.
That's how equilibrium is reached. We don't get to know if you are a genius or an idiot, not even after the fact.
Actively managed funds' management fees will begin to rise?