Part 7/11:
Basher highlighted an eye-opening statistic: out of over 29,000 publicly listed U.S. stocks since 1925, just 86 stocks have accounted for half of the wealth created. This concentration of wealth emphasizes the challenge of indexing—if a fund is structured around market capitalization, it will inherently favor firms that are not necessarily the best investment choices but may merely be popular or prominent in the market.
The dilemma is that while market cap indexing simplifies investing, it also raises questions about price discovery and the mechanisms of how stocks are valued, particularly as a smaller percentage of active investment can dictate the pricing of all stocks if passive strategies dominate.