Why “Over-promoting Index Investing” Is Disliked

In discussions surrounding investment methods, conflict often arises between proponents of index investing and those who favor active management or monthly distribution funds. However, the people who feel the strongest discomfort or look with the coldest eyes at posts that persistently assert the superiority of index investing or attack other methods are, in fact, the investors themselves who are quietly practicing index investing.

I will logically organize the background of why this friction occurs from the perspectives of behavioral economics, investors’ cognitive resources, and the confusion between the performance of a tool and an individual’s ability.

1. Differences in the utility sought from investment

The objectives and expected effects of asset management differ fundamentally from person to person.

• Static Rewards: Investing centered on accumulation and leaving it alone has few fluctuations or trading opportunities, creating a structure where reward substances like dopamine in the brain are less likely to be released.

• Dynamic Rewards: The immediate effect of monthly cash income or results from frequent trading brings strong stimulation and a sense of execution. For those who enjoy the process of money increasing itself, this stimulation is an important utility of investment.

It is a natural aspect of human behavior that there are people who seek utility as entertainment or experience, rather than just efficiency or final returns.

2. The essence of sticking to a single index is “saving on thought”

On the other hand, the greatest rationality in investing with only one index fund lies not just in the pursuit of expected returns, but in saving cognitive resources and optimizing opportunity costs.

• Redistribution of time: By reducing the time spent on stock analysis and market checking to zero, resources are concentrated on one’s main business, hobbies, and other activities.

• Superiority of non-intervention: By minimizing involvement in the market, emotional misjudgments, trading costs, and tax friction are physically eliminated.

In other words, for index investors, investment is a tool for minimizing involvement time and leaving things alone, and not thinking about money or investment at all can be called a strategic choice.

3. Why excessive posturing and criticism of other methods are disliked

The reasons why posting that emphasizes the legitimacy of index investing or criticizes others is avoided, regardless of investment style, are as follows.

1. Redundancy of information: The fact that low-cost, long-term diversification is rationally advantageous is already common knowledge, and emotional praise or preaching only becomes information noise.

2. The unnaturalness of mistaking the performance of a tool for individual ability: Index investing does not require individual analytical or judgment skills, and it is a mechanism where anyone can obtain the same market average. The results obtained are due to the design of the product and the growth of the market, not the ability of the individual investor. The attitude of mistaking the state of merely using an excellent tool for “I am smart” and looking down on others who are using trial and error causes discomfort to those around them as a fundamental cognitive error.

3. Contradiction with the original philosophy of leaving things alone or indifference: The essence of index investing is to step away from investment and live quietly. Nevertheless, the act of preaching to or trying to refute others on social media every day consumes a huge amount of time and emotional energy on the theme of investment, which is the biggest factor that makes them disliked by other investors of the same method who want to invest quietly.

4. Imposition of purpose: Even though the purpose of investment is different for everyone, the stance of judging others’ preferences as ignorant or irrational based solely on one’s own evaluation criteria is merely the forcing of one’s values.

5. Damage to the image of the attribute: The fact that index investors are labeled as exclusive and aggressive due to some players making extreme remarks is also a disadvantage for investors of the same method who are participating in the market quietly.

Conclusion

Investment methods are merely tools chosen according to an individual’s goals, risk tolerance, and lifestyle.

Boasting about the performance of a tool as if it were one’s own ability, or condemning others’ choices of tools, is an expression of a desire for approval that is unrelated to financial rationality or the original goal of ‘directing one’s life time elsewhere,’ and it becomes a factor for being viewed coldly from any perspective.