I’ve been looking at how passive investing has changed the way smaller companies in the S&P 500 trade, and it seems like it’s making it harder for people to buy and sell these stocks easily or figure out what they’re really worth, especially when you look at how the gap between what buyers want to…
When money flows into passive funds, it tends to get funneled into the biggest companies just because they are already big, which means their stock prices can keep rising for reasons that have little to do with how well those companies are actually performing, and over time, this can make prices drift away from what…
When index funds use capitalization weighting, they end up buying more of the tech stocks that have already gone up the most, which means they are often buying at the worst possible moment, and this habit quietly chips away at returns over time because it locks in the cost of chasing momentum.
When Nasdaq quickly adds huge new companies like SpaceX to its indexes, even though only a small number of shares are actually available to trade, it sets up a situation where index funds have to buy at whatever price they can get, which almost always means paying more than they should. If you look at…
Why the S&P 500 cap-weighted index has silently become a momentum strategy, and the mathematical cost of equal-weight downside protection.
An engineering analysis of how MSCI’s algorithmic Value and Growth classifications force unnecessary portfolio turnover and degrade long-term investor returns.
AI Software Engineer at Google | PhD in AI & Engineering | Writing about AI, Engineering, Investing, and Personal Finance.