Post #54 by Baltassar on the Index Investing board

Investment Strategies / Index Investing

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I can't speak for Manlobi, but I have never understood the idea that firms managing index mutual funds have "outsize influence." How is such influence exercised, and to what end?

As to the claim that cap weighted indexing is influential per se, insofar as it pushes money toward larger companies, I can see that being true on the margin; but maybe not. If mutual funds were outlawed, my guess would be that big companies would be more, rather than less, able to attract disproportionate investment. The "nifty fifty" long antedated the widespread use of indexing. I speak in total ignorance, but I would not be surprised if indexing has increased, rather than decreased, the diversity of the average portfolio.

Baltassar

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