I had read recently about Jack Bogle discussing the over-saturation of ETFs in the market and the consequences of this strategy when applied by so many investors at once. He seemed to claim that if everyone were to invest only in ETFs, it could defeat the purpose and value of ETFs.
I'm interested to hear other people's opinions about this theory. It seems logical that if ETFs become too prevalent, the market then becomes artificially inflated because people are investing in every stock rather than just the ones that are really performing. The statistical underpinning of the ETF strategy would start to fall apart because the benefit of ETFs depends on the market behaving normally.
I wonder at what level of investment ETFs will start to become counter-productive. Forbes claims there are $4 Trillion invested in ETFs worldwide. I wonder if we are already there? It makes sense it would be predicated by higher than average P/E ratios for the market as a whole.
It actually seems to predict that the ETF strategy will eventually disappear [or at least diminish significantly with a market crash] Perhaps it could be the cause of the next big market correction. (It is a newer innovation - ie. post-'09 - that has grown well beyond its intended purpose.)
I'm interested to hear other people's opinions about this theory. It seems logical that if ETFs become too prevalent, the market then becomes artificially inflated because people are investing in every stock rather than just the ones that are really performing. The statistical underpinning of the ETF strategy would start to fall apart because the benefit of ETFs depends on the market behaving normally.
I wonder at what level of investment ETFs will start to become counter-productive. Forbes claims there are $4 Trillion invested in ETFs worldwide. I wonder if we are already there? It makes sense it would be predicated by higher than average P/E ratios for the market as a whole.
It actually seems to predict that the ETF strategy will eventually disappear [or at least diminish significantly with a market crash] Perhaps it could be the cause of the next big market correction. (It is a newer innovation - ie. post-'09 - that has grown well beyond its intended purpose.)
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