Alternative investment strategies
To address these inefficiencies, alternative investment strategies have emerged that incorporate the benefits of index funds while avoiding their pitfalls.
Funds like those offered by Dimensional Fund Advisors demonstrate how a non-indexed approach can yield better returns by allowing for more flexible trading strategies.
By delaying investments in IPOs and avoiding rigid rebalancing rules, these funds can mitigate the adverse selection and price pressure effects that plague traditional index funds.
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Ben Felix, CIO at PWL Capital, explain why even great index funds have room for improvement. There are hidden costs to index investing from adverse selection, price impact, and mean reversion.
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