The Passive Indexing Endgame

Due to demographics and the sheer size of index funds relative to the size of the stock market (now approaching roughly half of the U.S. stock market), there will come a time when the indexing giants must sell some of their shares into the market to meet client requests for cash.

Simple logic suggests this will be a catastrophic event, since there are simply no investment funds the size of the Big Three indexing giants. Therefore, there is no entity large enough to take the other side of the trade if passive funds wish to sell.

Remember, for every seller there must be a willing buyer.

That is the endgame. Even Vanguard founder Jack Bogle was terrified of it.

And that is why we say Passive Parabellum.

This is only a general, high level summary of the case against passive.

Please read through these posts for more in-depth analysis and be sure to check out our interviews and videos section for a excellent, easy-to-understand overview of these topics.