Debunking some myths and misconceptions about indexing
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چکیده
One of the most persistent myths in the investment industry is that it makes sense to use an index strategy in efficient markets, for instance with large-capitalization stocks, but to use an active strategy in inefficient segments. It’s important to note that the term inefficient is often used to refer to informational inefficiencies. But investors must also consider the full spectrum of costs in those markets deemed less efficient.2 The fallacy of the “efficient-market” myth is that the underlying objective of indexing is to own the market (whatever that market may be) and to get the return of that market (minus costs). The indexing concept makes no judgment as to market efficiency, size, or style, nor does it need efficient markets to be effective: Every market will always have an average return, whether the market is deemed efficient or otherwise.
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