Nowadays, index funds are often hailed as the crown jewel of personal finance. And this makes sense given that index funds give you moderate returns and significant diversification making it possible for everyday people to grow their wealth. While index funds have been a great option for the past few decades, some investors like Michael Burry are actually warning that index funds may just be a massive bubble for a few reasons. First of all, index funds don’t actually have big of a history. While the S&P 500 and Dow Jones have been around for about 100 years, they were mainly used as an indicator throughout the 1900s as opposed to an investment. Now, this it’s used as an investment, stocks in the S&P 500 are starting to perform well simply because they're part of the S&P 500 leading to asset inflation across the index. Aside from this, the S&P 500 isn’t even that diversified in the first place given how much weight the top companies receive. In fact, much of the index is holding back its performance. This video explains the shortfalls of the S&P 500 and why index funds may be the biggest bubble of our time.
0:00 – Index Fund Bubble
1:08 – Short History
4:09 – Asset Inflation
7:04 – Not Diversified
10:15 – Truth About Index Funds