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PASSIVE INVESTING: THE ROLE OF IMPLICIT SECURITY SELECTION




Here’s a provocative thought. Index investing is not an entirely passive investment management strategy. Passive investing is rife with implicit investment decisions, many of which investors unknowingly transfer to the invisible committees that manage such indexes.


Though a whole generation has grown up with the myth that indexes do not engage in stock picking, the fact is that all indexes regularly “buy and sell” individual stocks.


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