if everyone has index funds, as some recommend, how would stock prices fluctuate according to their future val
August 17th, 2010
ok, this is probably a stupid question.
but I’ve been hearing for a while now how one should only purchase index funds, because the stock market is efficient. but if everyone purchased index funds, woudn’t it hurt the stock market. wouldn’t stock prices NOT move according to profits, which is bad.
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Tags: index funds, profits, stock market, stock prices, stupid question
Your logic does not make sense. And "everyones" logic about efficient market theory as much as I wish it were true, does not exist either (insider trading for one ie Enron). If everyone bought an index then therefore there would be more money flow into the company’s that are on that particular index, which would then drive the stock market up and the price of the companies in the index up as well.
Just play your questions scenario in your head and you will come up with the right answer.
FYI-Alot of of buying was going on during the bubble of the late 90’s and profits sometimes were being ignored. Did the market go up at that time?
Only buy index funds if you are so lazy that you aren’t willing to learn how to make more than the regular stock market. It is pretty easy if you are an individual, its just hard for the funds. So go read 5-10 books and that will be a darned good investment if it helps you beat the index fund you were gonna buy, right?
Jeff
http://www.best-stock-trading-systems.com/trading_for_beginners_review.html