13 Oct New Book Encourages Investors to Join the “Index Revolution”
Charley Ellis’ new book “The Index Revolution: Why Investors Should Join It Now” discusses how the investment landscape has changed and how investors are better served with passive, indexed strategies than active management. A few stats investors should consider:
- Trading volume on the New York Stock Exchange increased from three million to five billion shares daily over the past 50 years.
- The dollar value of trading in derivatives rose from zero to more than the value of the cash market.
- Trading by individuals has been overwhelmed by institutional and high-speed machine trading, now representing 98 percent of all trading.
- The 50 most active professionals (half of them hedge funds) do 50 percent of all NYSE-listed stock trading.
Other issues leading to his recommendation that investors are better off indexing:
- SPIVA research showing how few active managers outperform their benchmarks
- SEC Disclosure rules for public companies restricts what they can tell you- limiting individual research
- competition from nearly 1 million investors seeking to find securities pricing errors
- fees for active management
- diminishing number of active funds.
A summary of the book with comments from Charley can be found in an interview conducted by Mark Miller appearing in WealthManagement.com.