Is there a passive investment bubble?

by IA|Published September 9, 2019

Steve Sosnick, Interactive Brokers’ chief strategist, examines the risk of a massive passive investment bubble.

Michael Burry, one of the managers portrayed in the movie “The Big Short” who predicted the 2008 financial crisis, recently said that passive investing products could be the next speculative bubble to explode.

According to Burry, exchange-traded and index funds are inflating stock and bond prices much like collateralized debt obligations did for subprime mortgages in the mid-2000s.

Steve doesn’t go quite that far, but does examine how market liquidity could be impacted by passive investments during the next downturn.

Check out this video to learn more.

Photo Credit: Mac.Else von Berlin via Flickr Creative Commons

AUTHOR

IA

Interactive Advisors is a pioneer in online investing. Interactive Advisors offers a variety of portfolios, including the Asset Allocation portfolios, which are managed by Interactive Advisors's Chief Investment Officer and Investment Management team. Diversification is about buying a basket of securities that tend to do well (or poorly) at different times and under different economic conditions. Being thoughtful about how much capital to allocate to each of these securities can result in far more consistent returns than concentrating all capital (and risk) in a single security or asset class. Interactive Advisors offers several diversified portfolios that are dialed up or down for risk, offer good diversification across different asset classes, and attain this diversification by investing in low-cost, liquid ETFs.

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