With recent developments in the financial markets, we’re seeing quite a bit of people who are concerned about index investing and the effects it may have on the economy. We dedicated today’s episode of Grow Money Business to addressing some of these concerns. Throughout the episode, Grant shares his thoughts on four of the biggest arguments against index investing and some studies that question the legitimacy of each.
[03:18] Recent Developments – How the recent developments in the financial markets reignited the discussion against index funds.
[06:15] Competition – One of the major arguments against index investing is that it reduces competition within an industry. Grant shares his thoughts on why this notion is not valid.
[13:11] Corporate Governance Standards – Grant explains how index funds allocate their resources in a way that’s beneficial to shareholders and why index investing won’t create corporate governance issues.
[16:46] Price Discovery – Grant breaks down how the price discovery mechanism works and why index investing is unlikely to hurt price discovery.
[28:20] Income Inequality – Grant shares his take on the argument that index investing exacerbates income inequality.