While index funds have revolutionized investing by making it accessible and cost-effective, they are not without their flaws.
The inherent design of index funds, focused on tracking market indices rather than optimizing returns, leads to hidden costs that can diminish overall performance.
By adopting more flexible investment strategies, investors can potentially enhance their returns and recapture lost value, making a strong case for rethinking how we approach index investing.
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Ben Felix, CIO at PWL Capital, explain why even great index funds have room for improvement. There are hidden costs to index investing from adverse selection, price impact, and mean reversion.
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