Sorry if this is a stupid question, but with the booming popularity of index funds (like VFINX) and passive investing, how can the market accurately valuate a companies worth? In other words, if no one is investing based on growth potential or dca of a particular company, but large asset management firms like vanguard are buying the stock because it resides on a popular index like the s&p, what market factors are going to be able to force a company off the index or allow for proportional change in a companies stock price relative to the rest of its sector and will market makers still be able to function properly? It seems to me that if there is disproportionate growth in index investing then it will be difficult for investors to accurately judge the demand for a companies stock because the majority of the buy orders will be comping as a result of passive investment and not confidence in the company.
Submitted August 22, 2017 at 12:18PM by programerandstuff http://ift.tt/2w0LiP4
