Market neutral index fund investment can not be accurately described as fueling a bubble, though. You're neither bullish nor bearish on Mag7 in particular.

How does your first premise follow from the second? Yes, you're not bullish on these companies specifically, but you're effectively giving them (and some others) your money and inflating their valuations. You're bullish on the status quo and they're a large part of the status quo.

In fact, it's arguably worse than deliberately investing in them, because you're completely indifferent to the soundness of their business model. The hope is just that through the magic of "efficient markets", someone else will arbitrage your errors away... or something.

Being completely indifferent to the soundness of a publicly traded company's business model is the correct choice for most ordinary people trying to invest their retirement savings, because they have no basis for thinking any other choice of how to invest will result in superior returns. This is the entire line of thinking behind all passive index-fund-based stock investing.

And in the end you have a market where nobody has any basis for thinking anything has any value, and the market ends up being a random walk.

Nah. The more irrational it gets, the more margin available to active. There's always an incentive for active investors to participate in price discovery.

With massive concentration like this you are forced to be bullish, as your success is predicated on the bubble not bursting.

With broad index funds you’re merely following the average market sentiment. So you’re only bullish to the extent that the market as a whole is bullish on those stocks.

This discussion here is not about what you're betting on - it's about whether your bets are fueling a bubble. Which they are.

You are copying what active investors (in aggregate) are doing so if they’re fueling a bubble so are you.

> You are copying what active investors (in aggregate) are doing so if they’re fueling a bubble so are you.

The "in aggregate" is doing a lot of heavy lifting here. Active management holds concentrated positions in certain investments because they think they will outperform. Active folks believe they have found market inefficiencies, whereas passive folks lean towards the market being (relatively) efficient (enough) and chasing returns won't work (at least for most people):

* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

"Active" and "passive" exist on a spectrum and are not binary:

* https://rationalreminder.ca/podcast/133

People passively invest because active investing rarely outperforms passive.

To be a little more precise, the version of active investing available to retail investors rarely outperforms. Some shops are very good, but they aren't taking retail money.

Not as clear cut as that. There is a delay before an index rebalances, indexes have tracking error that influences how closely they follow and 'passive funds' do active trading to snip deals on the market.

I forget the name of the yt channel, but they did an interesting interview with Vanguard reps. The reps said that active funds will often need to liquidate assets they will sell at a discount to an index fund directly that will buy it anyway. They don't want to sell to the public market as that would reduce the value of their assets still on the books. In this way a passive fund can take advantage of an active fund and is one of the reasons why many active funds struggle to beat a passive one year after year.

Value funds. If you buy stocks that make, like, actual profits, your exposure to AI "tech" is low.

Microsft, Google, Nvidia, and Facebook earn tons of money and fuel the bubble.

They all have tiny dividend yield.

Dividend yield doesn’t determine value.

Indeed! It's unclear how that is relevant to the discussion though.

Are there any mutual funds that track these types of companies?

Yes. https://investor.vanguard.com/investment-products/etfs/profi...

N.b. I wouldn’t recommend it for various reasons, but it exists.