The Powerful Secret the ETF Companies Don’t Want You to Know

I love passive investing—but not for the reason you might think. I love it because, as I’ll demonstrate in a moment, it’s caused plenty of stocks to become mispriced, creating opportunities for active stock pickers who do their homework. This makes the market more of a meritocracy: the people who work harder, smarter and spend more time and energy on their investments can get a higher return than those who buy index funds like the Vanguard Total Stock Market ETF (VTI) and call it a day. Why? Because the more people buy VTI and other index products, the more they drive up the prices of all the stocks in that index. And since these indices aren’t weighted toward any valuation metrics, that means pricier stocks get just as much of a price boost as cheaper ones. ... Read more