Most people think buying an index fund means "I don't want to make decisions."
Fair. I love that.
It is one of the best things about passive Index ETF investing.
You are not sitting there at midnight trying to decide whether an AI company is overvalued, whether the CEO is a good fit, or whether next year's earnings will justify today's share price.
You buy the market.
You get on with your life.
But recently I caught myself thinking about one little problem. When we say, “I don’t make decisions, I just buy the index..." The decisions do not disappear.
They just get moved somewhere else.
Into a rulebook.
Into an index methodology.
And sometimes, into an index committee.
That sounds boring, I know.
“Index methodology” is the kind of phrase that makes you want to suddenly clean your fridge.
This is one of the most misunderstood parts of ETF investing.
An index fund does not own "the market" in some pure, natural, untouched-by-humans way. It owns whatever the index says it should own.
An index is a methodology, a rule book that decides things like:
- What size a company needs to be before it gets included
- How much of the company must be available for public investors to buy
- Whether the company is profitable.
- Which exchange it lists on
- How liquid the shares are
- Weighting method: equally, by market cap, by fundamentals etc.
- How often does the index rebalance
This means two ETFs can both sound "broad" and "passive" but behave quite differently. They are baskets with rules. And we should know who wrote them.
SpaceX
The space industry is exciting.
Satellites. Rockets. Defence. Internet coverage. Navigation. Data. Earth observation.
It sounds futuristic because it is.
McKinsey and the World Economic Forum estimated the global space economy could grow from $630 billion in 2023 to $1.8 trillion by 2035.
But a huge industry does not automatically mean a great investment.
- Airlines changed the world. That did not make every airline a wonderful long-term investment.
- The internet changed the world. That did not save every dot-com stock.
- EV changed the car industry. That did not mean every EV company deserved any valuation at any price.
The hard question is 'how much of that future is already priced in?'
What does it have to do with an index fund?
If a giant private company eventually becomes public, and if it later qualifies for the index your ETF tracks, you may end up owning it without ever making an active decision to buy it.
One day, you could open your ETF holdings and think:
“Oh… apparently I own a tiny piece of that now.”
Passive does not mean rule-free.
It means you choose the rules once, then let the system run.
And that system can slowly change over time.
The “boring” ETF you bought five years ago may become more concentrated.
More tech-heavy.
More exposed to one country.
More exposed to one theme.
More expensive on valuation.
More dependent on a small group of giant companies.
Again, this does not mean simple ETF investing is broken.
I still like it, a lot.
But passive investing does not mean closing your eyes forever.
You need to choose the rules you are comfortable living with.
Your ETF is not just a product. It is a set of decisions someone else made in advance.
With curiosity,
Irene
