OhNoNotimAgain wrote:Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.
A market cap weighted tracker of an index of all the available stocks buys new companies when they enter the index. Companies are usually small and never particularly large when they do that. After that, it just holds them until they are taken over or go bust.
Sometimes the market gets it wrong and companies grow too large. That is not a problem. Those companies then move down the batting order and other companies move up.
The cheapest trackers beat 80-90% of managed funds. There is no way of picking winning managed funds that has a better than chance rate of success.