According to Investopedia, “indexing” is a form of passive fund management.
Instead of a fund portfolio manager actively stock picking and market timing—that is, choosing securities to invest in and strategizing when to buy and sell them—the fund manager builds a portfolio whose holdings mirror the securities of a particular index.
The idea is that by mimicking the profile of the index—the stock market as a whole, or a broad segment of it—the fund will match its performance as well.
The passive feature of index funds has been criticized by some people.
For example, one 2013 article from Business Insider said that “The idea that this is a ‘passive’ process is beyond me – it’s an active decision to ride on the coattails of other people’s decision making.”
It suggested that Index funds are parasites and are going to kill the market.
In this video, an investor asked Jack Bogle the same question: “Are Index funds parasites?” Bogle gave his firm answer and defended the merit of index funds.
Source: Finance Jane
