Vanguard Is Growing Faster Than Everybody Else Combined
As a Vanguard customer, I can understand why people are so enthusiastic about their products, and have known for a while that passive investment, and Vanguard in particular, was growing while active management was on the decline.<p>At no point did I think the difference in inflows was anywhere close to 8.5x. And it does worry me.<p>I'm familiar with the contention that even having some active players in the market will arbitrage the prices back to fair value, but when they compose such a small share of such a large market that's no longer a trustworthy assumption to make.<p>There's no law that I know of that prevents active players from exploiting the knowledge that passive money will go wherever the market tells it to. There have got to be a lot of opportunities here for profiting, legally, at the expense of those passive investors, that goes beyond simple margin arbitrage.<p>My point is, the less active money there is around, the less accurate our concept of a correct value can be.  This situation has the potential to de-stabilise the economy sooner rather than later.