Hello,
I started investing passively in 2019, and today I’ve decided to begin liquidating my six-figure portfolio, as I’m currently sitting on significant gains.
**Why do I think it’s reasonable to start liquidating now?**
I’ve been following the latest news about trade wars with a sense of enthusiasm, hoping for a substantial market crash and preparing cash to go long — basically planning to buy everything as it falls.
And what did we get instead? A 20% “crash.”
Honestly, a one-year-old hits harder than this so-called “trade war” everyone’s talking about. Despite the headlines screaming “extreme fear” in the market, what I see is the same pattern: Reddit, the internet at large, Ben Felix, my neighbor’s dog, and all my friends are out here buying the dip, staying resilient, and laughing off “yet another crash.”
After thinking it through, I’ve come to a personal conclusion: I’m going to liquidate my portfolio and use the money to start my own business. Here’s why:
**1. Index ETFs**
That’s where I’ve been putting my money so far. But in my opinion, they’re increasingly skewing market prices. With so many people investing passively, these ETFs are driving up the prices of the same set of companies without any regard for fundamentals. BlackRock, Vanguard, and similar giants are amassing huge amounts of capital and funneling it into nearly identical portfolios, deepening the effect.
Passive investing risk premium over inflation works well **only** if there are inefficient, active investors out there — people who try to make rational decisions, make mistakes, and thereby create opportunities. But if everyone’s on the passive bandwagon, who’s left to create those inefficiencies?
It’s like game theory: if stock prices are expected to rise indefinitely, no rational person would sell as it is -EV move. So passive investors rely on someone else making a mistake. It's not a risk premium if there is no risk, if there are no crashes etc. But over the years, I see fewer active investors and more people piling into index funds, inflating a bubble. If no one’s on the “other side” of the trade, what’s left to capitalize on?
We’re heading toward a market where everyone is “smart” and investing in overlapping index ETFs — causing massive inflows into the same companies and amplifying the problem.
**2.** "**Over-educated" Market Participants**
Market participants today are also so “smart” to hold through crashes and keep buying regardless of price. Why? Because they’ve all read that historically the expected return goes up as prices fall.
Congratulations. Now, all that’s left is to spread this gospel everywhere — so no one ever sells, and crashes become so short and shallow (like this tariff drama or even the COVID crash) that they barely register.
Passive investors **need** panickers — people who sell at a loss and make irrational decisions, not the other passive investors. Without that, the system becomes a zero-growth Ponzi scheme, reliant solely on new inflows. Eventually, people realize this, and when they do, the crash could be catastrophic.
Educating people on rational investing is **counterproductive** to passive investors. What really is productive for them is to spread **fear**, in order to create volatility and capitalise on poor decision-making of other participants, while they continue to buy. But fear is disappearing. Crashes now feel laughable and pathetic. Everyone is very "smart", just beside the fact they're hitting themselves while spreading rational information.
What would actually be beneficial for passive investors is to spread ideas like active investing, stock picking, meme stocks, trade signals, and get-rich-quick schemes. Those create inefficiencies for passive investors to exploit passively, just when buying stocks as most people participating in those things would make -EV moves. But unfortunately, I see less and less of that kind of content over time. Which is growing some concerns in me and finally **I decided to leave this Titanic early** and do better things with my money than to participate in a bubble.
Prove me wrong and change my mind.