@joncoles, The concern is that passive funds, like ETFs, by just tracking an index, mindlessly drive up prices by buying stocks regardless of fundamentals and as a result companies are not being correctly priced. Eric Balchunas busted in his book, The Bogle Effect
If we look at the ASX specifically. If index funds were mindlessly driving up prices, wouldn’t all the stocks in the index be trending in the same direction? You need only look at the movement of the top 10 stock prices in the ASX since the beginning of the year to see that they are far from uniform.
Don't get me wrong I wish that was true maybe my BHP, RIO etc would be in better shape in the portfolio right now. Much of the hysteria about ETFs and passive funds distorting markets, mindlessly driving up prices or creating bubbles is exactly that, hysteria.
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