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julianeon · 2023-01-14 · Original thread
Your comment is funny because of the loads of irony behind it.

Empirically incorrect? The 'index fund strategy' stated under another name is essentially the same as efficient markets theory, which multiple economists have won Nobel Prizes for. This is mainstream economic theory today.

But even worse - to my knowledge even skeptics of efficient markets theory don't deny that few people beat the index. They think they can pick them of course - but they never claim that most people outperform the market (the same thesis, restated).

So your comment is, bluntly stated, empirically incorrect, because no serious academic (to my knowledge) denies that very few people beat the index. The reason incidentally is because index funds have zero fees, and active investors have nonzero fees, and long term they converge - so the zero fee lower cost basis strategy wins out. And if you're claiming that average investors with "zero fees" generally outperform the market... that is empirically, provably, incorrect.

Stated with unbelievable confidence... yes, the confidence that the papers that the economists who won those Nobel Prizes instilled, which has now become economic orthodoxy, which also helped spur the creation of index funds in the first place.

There is a strong connection between efficient markets theory & those funds very existence: because if active investors underperform the market, then the best strategy is just to hold the market, a strategy which got repackaged and named as 'index funds.'

A good book on the topic:

https://www.amazon.com/Trillions-Renegades-Invented-Changed-...

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