Klement on Investing • 4 implied HN points • 05 Feb 25
- Index funds can make the stock market riskier by increasing how closely stocks move together. When more money goes into these funds, stocks often react in similar ways.
- The ownership of stocks by index trackers affects their risk. More index fund ownership leads to higher stock price drops during market downturns, meaning more losses for those stocks.
- As index funds grow, the overall market's volatility also increases, making big market drops worse than they used to be. The concern is that everyone could suffer larger losses during a major market downturn.