I recently transferred my Roth IRA from Dodge & Cox (fund: Global Stock) to Vanguard (fund: LS Growth), but I’m not 100% comfortable with my move because I’m not sure how wise it is to hold only index funds (401(k) funds: Spartan 500/Spartan International/Vanguard Total Bond).
There are $100s of billions of dollars in index funds. At some point, I would think the size of assets invested passively would reach a tipping point and begin to affect markets in terms of efficiency. I’m about four decades out from retirement and am concerned that at some point during the way, with the rising popularity of passive investing (at the expense of active investing), that passive investing will, in effect, become the market and massively gum up the works.
Am I wrong to be concerned that passive investing will become too big to function effectively?