Performance Perspectives Blog

Index funds … designed to outperform?

by | Nov 29, 2010

Jason Zweig’s piece in this weekend’s Wall Street Journal serves many purposes, one being a clue as to why it’s so difficult to beat indexes. It occurred to me some time ago that the index designers must be exceptionally talented at constructing them, but perhaps their mere existence serves as a device for “above average” performance, since any changes to them typically result in buying frenzies which, of course, cause stock prices to rise (and of course selling of the tossed out issues).

There is probably plenty of room for research into this phenomenon, and perhaps much has already been done (I haven’t yet investigated this). But Jason’s insights offer, as usual, good reading material and ideas to ponder.

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