The Rise of "Lazy" Investing: A Breakdown (Patreon)

TLDR

Passive investing (ETFs/index funds) has grown from 20% in 2012 to 55% in 2025. It’s cheap and easy but dangerous: it inflates weak “zombie” companies, concentrates money in a few mega-firms, and makes markets move in sync. This creates bubbles and systemic risk. When it unwinds, it could trigger a severe crash. Diversification and some active investing are needed to avoid disaster.

In the age of AI -there is going to be more disruption than we haver ever seen and I maintain 60% of the S&P500 is going to be made redundant by 2030 and drastically underperform.

The Details

Think of the stock market as a party. Back in 2012, only about 20% of people were just copying the dance moves ("passive investing" through index funds and ETFs). Now in 2025, more than half (55%) are doing it. It’s cheap and easy, but it creates big risks.

Why it’s risky:

• Fake Prices: Passive money just buys whatever’s in the index. This props up weak “zombie” companies and inflates stars like Apple, even if they don’t deserve it. Prices stop reflecting real value, making bubbles more likely.

• Too Much in Too Few Stocks: Passive funds pour money into mega-companies, crowding out smaller ones. When panic hits, everyone sells the same stocks at once → wild crashes.

• Everything Moves Together: Because passive funds hold the same baskets, whole markets rise and fall in sync. A small problem can spread quickly, triggering a big meltdown.

This cycle feeds itself: more passive investing → more distortions → more danger → which ironically pushes even more people into passive funds. Eventually, when the “music stops,” weak companies will collapse and markets could crash hard, hurting everyday investors. Experts warn it’s not if, but when. The advice: don’t rely only on passive funds—mix in active strategies or diversify.

In addition, if you are in passive funds, you will never beat dollar debasement IMHO