Is Passive Investment Actively Hurting the Economy?

If you have so much as tiptoed into the arena of personal finance over the past few decades, you will have heard about the virtues of passive investing. The argument goes like this: the stock market will outperform other investments over the long term, yet no individual is in a position to outsmart the market as a whole. So the best way to reap the rewards of investing in stocks with minimal risk is to put your money in a fund that tracks the performance of some broad, indexed measure of the market, such as the S. & P. 500. If you have an I.R.A. or a 401(k), there is a reasonably good chance that some of your money is invested this way; low management fees make index funds an attractive option.