By enabling investors to inexpensively capture beta, index funds, in our opinion, have greatly benefited investors. Even enthusiastic supporters of index funds acknowledge that some worries are raised by the sector’s fast expansion.
As we will show below, buying just S&P 500 index funds to invest in US large caps forces you to acquire stocks that are so costly that historical data suggests they may lose value over time. According to empirical data, shrewd long-term investors would be best served by owning portfolios that exclude pricey stocks like these.
