Imagine for a moment you have a pile of cash. Where are you going to put it? Into the S&P 500? A passive index fund?
Not me.
Legendary investor Jack Bogle, and now Michael Burry, whose story was immortalized in The Big Short as one of the first investors to call the subprime mortgage crisis, have expressed their concerns.
“There no longer can be any doubt that the creation of the first index mutual fund was the most successful innovation—especially for investors—in modern financial history,” wrote Bogle here, “The question we need to ask ourselves now is: What happens if it becomes too successful for its own good?”
“Trillions of dollars in assets globally are indexed to these stocks,” Burry said. “The theater keeps getting more crowded, but the exit door is the same as it always was. All this gets worse as you get into even less liquid equity and bond markets globally.”
Remember, returns you’re looking at today, especially the 10-year annual average, are going back to 2009—the beginning of the bull market.
Be selective with your stocks.
Your work should begin, and certainly not end, with the dividend.
