How can passive index funds be sustainable at large scale? Won’t they affect the indexes they are tracking?

How are index funds passively managed?

“Indexing” is a form of passive fund management. Instead of a fund portfolio manager actively stock picking and market timing—that is, choosing securities to invest in and strategizing when to buy and sell them—the fund manager builds a portfolio whose holdings mirror the securities of a particular index.

What are the advantages of investing in passively managed index funds?

Since index funds are passively managed, they usually enjoy low turnover, i.e. few trades placed by a fund manager in a given year. Fewer trades results in fewer capital gains distributions that are passed to the unitholders.

Why are index funds passively managed?

Passively managed funds are designed to follow an index. Having no active decision-making by a fund manager means lower fees. Passively managed funds reduce management risk. Passively managed funds tend to outperform actively managed ones.

Can index funds be a force for sustainable capitalism?

Index funds can be a force for sustainable capitalism. Socially conscious investing is exploding as a practice and at some point I expect it to be indistinguishable as a product or service or category.

Are there sustainable index funds?

According to Morningstar, the number of available sustainable index mutual funds and exchange-traded funds has more than doubled in the last three years — as has the money invested in them. Still, you’ll have more choice if you’re looking at active funds.