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685327592 t1_iv1aw5t wrote

ETFs have become so popular because there is mountains of evidence that no active manager can actually consistently beat them. HOWEVER as passive investments take over more of the market it actually does create arbitrage opportunities that active management can exploit.

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[deleted] t1_iv1y9b3 wrote

[deleted]

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685327592 t1_iv1znss wrote

When you buy an index you're buying stocks with no research into the underlying companies. This only works if the market is working efficiently and prices represent all knowledge available to the market. If most money is invested passively then the market can't work efficiently anymore because most of the buying and selling pressure is divorced from the underlying fundamentals of a company. This allows active managers to buy or sell stocks that are priced incorrectly in order to beat the market.

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