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Comment by nibbleyou | Hacker News Reader

I don't understand this logic. Does whole market mean scamming companies too?

Fun fact, both Enron and Lehman Brothers were in the S&P 500 when they went bankrupt. So yes, the whole market or even the market of the largest companies, includes some that may not be great companies. The beauty of the index is you don't have to know or care, since it'll take care of itself over time.

>The beauty of the index is you don't have to know or care, since it'll take care of itself over time

As long as there are active investors in the market conducting price discovery. Which there always will be, just pointing out that someone has to care, even if you don’t

> As long as there are active investors in the market conducting price discovery. Which there always will be,

Passive funds dominate ow, don't they?

Depends on what you consider passive, I think index funds specifically are only 20% but if you add other low cost ETFs it’s probably about half the market. I don’t think there’s any way to know for sure at what point passive funds become distortionary, but it should be self correcting to some degree. If active funds are able to provide a substantially better return than passive funds, even with management fees, people will migrate back to them.

> it'll take care of itself over time

At least until it doesn't. If this spacex venture succeeds because it got propped up by index funds, then that's a decent indicator that more will follow.

It stands to reason that active investing will be more valuable as a result

Yes. That’s what passive investing is. You give money to the passive fund, the passive fund buys the market. No regard to price or any other metric.

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