While the rapid rise in index funds over the past few decades is a “feel-good story—a populist victory, as finance goes” says an article in last month’s The Atlantic, there’s a growing number of experts arguing that passive investing is “strangling” the economy.’ The article cites research conducted in 2014 (by economist Jose Azar, Martin Schmalz and Isabel Tecu) to test whether airfares had been influenced by the growth of large shareholders—in other words, to determine… Read More
When Jack Bogle created the first index mutual fund for individual investors (Vanguard 500) forty years ago, he probably didn’t imagine that it would grow to 20 million investor-clients and more than $3 trillion. In last week’s Wall Street Journal, columnist Holman Jenkins, Jr. shares some of Bogle’s insights and opinions as he marks his 65th year as an industry leader. The 87 year-old visionary sees the appeal of index funds only magnifying given “the… Read More
Christine Benz and Russ Kinnel of Morningstar discuss the wave of assets moving out of actively managed funds and into passive index funds. According to Kinnel, of the Morningstar 500 (generally the largest, most well-known 500 mutual funds), 17 those funds saw assets fall by 50% or more over the last 12 months. The flight of assets out from actively managed funds is not a solely a function of relative underperformance either says Kinnel, and… Read More
The AAII Journal published an interview with Vanguard founder John “Jack” Bogle, to whom AAII gave its Cloonan Award for Excellence in Investment Education in 2015. The interview focuses on advice for the individual investor. Bogle said, “by far the best way to own equities is to own them through either a Standard & Poor’s 500 index fund or a total U.S. stock market index fund” and that an investor should “hold it forever.” He… Read More
Would Benjamin Graham, the man known as “the father of value investing” and a pioneer in security analysis, have liked plain, generic index funds? In a recent column, Jason Zweig, who edited an updated edition of Graham’s classic book The Intelligent Investor, says yes.