Stock prices, according to these proponents, always reflect their true value. Therefore, it is a waste of time to try to look for inefficiencies between price and true value because none exists. Diversification over a broad range of stocks across all sectors, they surmise, is in the clients' best interests. Better to own a representation of the market than to try to do the impossible. Indexes are the practical expression of these beliefs.
Index funds have some positive aspects in their design.
The result is little stock trading and therefore low brokerage fees. This also produces little in the way of realized capital gains for the holder while the index is owned. And, because no active investment decisions need to be made, management fees tend to be lower compared with those charged by active money managers. Indeed Mr. Sarbit extolls the virtues of indexing so eloquently that one wonders why he hasn't been able to make a persuasive case to the board of AIC that they launch a series of index funds. New cash coming into index funds is appropriated according to weightings of stocks in the fund at the time.