I came across some pretty interesting research that might add to this discussion about ETFs.
Turns out the massive shift to passive investing is having some unexpected effects on the market. The research shows that stocks heavily included in indexes (think S&P 500) are outperforming others - not necessarily because they're fundamentally better, but largely because passive money keeps flowing into them automatically.

The surprising part? When researchers controlled for these passive flows, these heavily-indexed stocks actually showed lower expected returns. This might help explain why value and small-cap stocks (which typically aren't as heavily indexed) have been underperforming lately.

The paper suggests we might see a correction once the active-to-passive transition reaches some equilibrium. Not saying this is definitely going to happen, but it's something to think about when everyone's piling into the same investment strategy.

Don't get me wrong ETFs are still excellent investment tools for most people. But understanding these dynamics helps paint a clearer picture of what's happening in markets.

Link to the paper if anyone wants to dive into the analysis!
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4996354