QOTD: The New Nifty Fifty

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Can this go on forever? Highly doubtful. While indexation is efficient and effective, there has never been a really good idea on Wall Street that hasn’t been taken to a foolish extreme (mortgage-backed securities, triple-levered exchange-traded funds, or smart beta). The situation is reminiscent of the old tale about the poker-game host who admonishes his friends, saying, “Let’s all play our cards carefully and maybe we can all make some money tonight.”

Just as only 10% of investors can be in the top decile, so inevitably the continuing rise in passive investing will create both winners and losers.

Indexing and the Rise of a New Nifty 50 (Barron's)

Frederick “Shad” Rowe of Greenbrier Capital Partners in Dallas has a good piece at Barron’s this weekend about how it may soon become profitable for investors to start distinguishing between good and mediocre stocks once again. Try to get to it.

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