Why does passive investing become so hot?

Active management is difficult because information is synthesized into stocks really fast. You have to be really informed and fast to monetize the repricing.

or you have to be really slow and willing to suffer volatility. You can only do that if your investors can’t redeem their capital easily (like shareholders in Berkshire)
 
The financially literate tend to invest their money as they understand that it is the best chance they have of a) beating inflation and b) growing their wealth long term. Schools don't teach children about money and so the vast majority don't invest. As of this year I believe in the UK 67% still don't invest their money themselves (most do via their pension but do so in blissful ignorance).
 
It was popularized by John Bogle who created Vanguard I think in the late 1950s. His books describe the problems with active management principally the outrageous fees of even the No Load Mutual Funds. Th Load Funds would add like 5-10% to initiate ownership.

I think his research pointed out that over 10-20 years almost no active funds beat the SP500 index. I think over 25 years it was like 2-3% of the funds that survived beat the SP500.

Ironically he was not a fan of ETFs, because he stated that they were prone to being overtraded by the public.
 
nitrene said:
It was popularized by John Bogle who created Vanguard I think in the late 1950s. His books describe the problems with active management principally the outrageous fees of even the No Load Mutual Funds. Th Load Funds would add like 5-10% to initiate ownership.

I think his research pointed out that over 10-20 years almost no active funds beat the SP500 index. I think over 25 years it was like 2-3% of the funds that survived beat the SP500.

Ironically he was not a fan of ETFs, because he stated that they were prone to being overtraded by the public.
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Spot on and with the latest CPI figures in the US and inflation figures looking dire around the world, low cost index funds are looking like the great option in my opinion that they really are.
 
I swear investment and saving should be taught in schools. I had a few thousand from inheritance when I was younger, I blew the lot. Would have struggled less if I had known what to do with it.
 
Jungletrader said:
Some aren't completely passive they do require some manual intervention
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That is the Achilles Heel of the index fund strategy. One that even Bogle acknowledged.

Long term these become momentum funds especially in an unchecked bull market like we have now. The QQQ is essentially an extended FAANG ETF. The XLK is mainly just 3 mega tech companies: AAPL MSFT & NVDA.

SPY is better at diversification but it is still 37% Tech & Communication Services, however the top 8 stocks are all large cap tech -- essentially FAANG MSFT TSLA & NVDA.
 
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