As you say, these are actual companies, not just stocks. If the market were 100% passively invested, the companies would have no value as no one would be setting the price.if the market were 100% passively held, the market would be inefficient because no one would be setting prices.But if the market were 100% passively held, would it cease to go up?It's the active traders that set the price. As long as there is someone willing to risk stock picking, the passive traders can follow along.The cover essay of this month's Harper's Magazine asks the question, "Does the rise of index funds spell catastrophe?" I believe--as I'm sure many here believe--that the answer is "No." Still, I think the essay is worth a read, as the author raises a topic often discussed on this board, regarding whether there's a point at which so much of the market is passively held that it becomes "distorted."
You can read the essay here: https://harpers.org/archive/2024/06/wha ... tastrophe/
Despite that companies will still be increasing and/or decreasing value as new products are developed and/or products are no longer desired, etc. So if stocks were to become mispriced, all it would take is at least two people (one buy and one sell) to start actively trading stocks again (determine the new price the stocks should be at after the new information came out) and the market would become more efficient again (and those of us passive investors would benefit from the trading of others, just as we do now).
In other words, do you really think there won't be people who will want to arbitrage and exploit mispricing if the market becomes "too" inefficient?
Not a chance.
Ah, i see this article is about Michael Green. There have been many posts on this before:
https://www.google.com/search?sitesearc ... hael+green
by the way, what is the alternative?
Even Michael Green said (recently on the rational reminder podcast) that investing passively is still the right choice for most people (until that is, it isn't because of his catastrophic doomsday scenario, which he admits may not occur in any of our lifetimes, if ever).
This is illogical - someone will want to own the companies. As soon as they try to buy the company, the price will be set.
If anything, I think the bigger concern is private equity and the reduction in publicly owned companies.
Statistics: Posted by gtrplayer — Thu May 23, 2024 8:22 pm