Investments with minimal active involvement for news reporters
In the world of finance, passive investing has become a buzzword, with more and more investors turning to this approach as a means of growing their wealth. This trend, driven by the increasing popularity of investment calculators, is reshaping the investment landscape.
The 'Big Three' of passive investing – Vanguard, BlackRock, and State Street – have amassed a combined $3 trillion in investment basics assets, according to a National Bureau of Economic Research paper titled 'The Spectre of the Giant Three.' Among these, Vanguard stands out, with a staggering 10.4% ownership of all US Stocks, as revealed by a Wall Street Journal article.
The story of passive investing began in 1976 when Jack Bogle, the founder of Vanguard, introduced the first passive investment fund, the Vanguard 500 Index Fund. Today, thousands of different investment calculators exist, but the biggest are still run by the 'Big Three.'
When an investor buys a single share of the BlackRock iShares Fund, for example, BlackRock buys a small portion of all 500 companies listed on the S&P 500, including Amazon, The Coca-Cola Company, Facebook, and Starbucks. Similarly, Vanguard's flagship fund, the Vanguard S&P 500, disperses invested money across all companies listed on the S&P 500.
Passive investing involves investing in a broad market index, such as the S&P 500, without human intervention in the investment decisions. This approach does not require in-depth knowledge of business or ongoing work, as the investor simply needs to find an investment calculator that meets their needs and let it sit.
The rise of passive investing has been fuelled by its perceived benefits, such as lower fees and a focus on long-term growth. Warren Buffett, the CEO of Berkshire Hathaway, has consistently stated that investment calculators are the best investment for common people because they are not skilled stock pickers.
However, the massive investments in passive funds have also raised concerns. Critics argue that this concentration of money and power within a few fidelity investments companies could lead to a bubble, a situation where an asset's value far exceeds its actual intrinsic value. The Bloomberg article titled 'Asset Managers With $74 Trillion on Brink of Historic Shakeout' provides further information about these concerns.
The Wall Street Journal article titled 'Bogle Sounds a Warning on Index Funds' also discusses these issues, highlighting the potential risks associated with the current state of passive investing.
For more information about the impact of passive investing and the 'Big Three,' you can visit this link. Additionally, Vanguard's website offers detailed information about the company's history, as detailed in the paper titled 'Vanguard's Remarkable History.'
In conclusion, while passive investing offers a seemingly straightforward and low-cost approach to growing wealth, it is essential to understand the potential risks involved. As always, it is advisable to do thorough research and consult with a financial advisor before making any investment decisions.
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