Most investors either ignore emerging markets or hand their money to active managers who underperform. Academic research points to a better approach: factor investing in emerging markets, targeting the company characteristics that have persistently driven higher returns.
The S&P 500's concentration in the Magnificent Seven has critics worried about indexing risk. But Hendrik Bessembinder's research reveals why index concentration actually strengthens the case for passive investing: just 4% of stocks drive all market returns, and active managers consistently miss these winners. Historical data shows market concentration has been normal for 150 years, from railroads to tech giants.
Robin Powell
Sep 9, 20258 min read
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