Passive Indexers Still A Rare Breed?

The video discusses passive indexing, highlighting that true passive investing involves owning a market portfolio, which is a weighted average of all financial assets. Despite the growth of indexing, most investors actively build portfolios due to factors like home country bias and market inefficiencies. The market portfolio, a concept from the 1950s, is considered efficient but has assumptions that may not reflect reality. Investors often deviate from it for valid reasons, adapting to changing market conditions.

What is a key characteristic of true passive indexing?

• Focusing on short-term gains

• Owning a market portfolio

• Owning a diversified portfolio of stocks

• Investing in high-growth sectors

Which of the following is a reason investors might deviate from market cap indexing?

• Belief in market efficiency

• Preference for high-risk investments

• Desire for immediate returns

• Home country bias

What is one factor that influences investors to create more personalized portfolios?

• Lack of investment options

• Market cap index weights not reflecting total economic activity

• Preference for government bonds

• High transaction costs

What is the market portfolio based on?

• A selection of high-dividend stocks

• A random selection of global stocks

• A focus on emerging markets

• A market cap weighted index of all available investments

Why might the assumptions behind the market portfolio not fully reflect reality?

• They ignore the role of government policies

• They focus solely on short-term gains

• They assume perfect market efficiency

• They are based on outdated data