Dimensional Fund Advisors takes a deeper dive in the universe of index investing and how the recent flows into index funds can affect weightings and potentially performance.

In the 90's passive investing was a very small sliver of the investing universe; now, it comprises over 50% of the investable universe as described by David Rosenberg and The Globe and Mail.

As long as market participants continue to rebalance their holdings, the increase in passive investing shouldn't have any major impacts on portfolio performance. As we've seen with NVDA and other market darlings, as the stock price rises it, it's weighting in the index fund also rises creating a bit of a self-fulfilling prophecy. That is why rebalancing, and at times individual stock selection, has a more crucial role in the current investing environment of 2025. Keeping a stable head, while keeping inherent value in mind, remains more important than ever for market participants. This is not a new philosophy, but it is important to apply these age old strategies amidst the current investing landscape.

Please Click Here for Dimensional Fund Advisors take on the matter of Weighting Whiplash, written by Wes Crill, PhD.