Why a Full ETF Strategy Might Not Be Good — Especially Now

Over the past year, I’ve found myself quietly asking a question that feels almost contrarian in today’s investing world:

Should I really be putting everything into ETFs?

I don’t ask that lightly. Like many long-term investors, I’ve studied the data, seen the charts, and heard the advice: “Low-cost index funds outperform most active managers.” It’s compelling. It’s clean. And for a while, I followed it without question.

But lately, I’ve started to rethink. Because when you step back, two uncomfortable truths start to stand out. And if you’re investing for the next 20, 30, or 40 years, I think they’re worth considering.

1. When Everyone Owns the Same Thing

There’s a strange comfort in owning index funds. It feels responsible. Safe. Like you’re not making a bet—just following the evidence.

But markets are made of people, and history tells us that when too many people crowd into the same strategy, risk doesn’t disappear—it just hides.

In the 1960s and early 1970s, the “Nifty Fifty” stocks were seen as bulletproof. Companies like IBM, GE, and Coca-Cola were considered “one-decision” investments: just buy and hold forever.

Sound familiar?

The modern version is the S&P 500. People don’t say it out loud, but the feeling is similar: “You can’t get fired for buying the index.” Except the index today is heavily concentrated in a handful of mega-cap tech names.

Back then, when the Nifty Fifty bubble burst, some of those “safe” stocks lost over 90% of their value. That doesn’t mean index investing won’t work over the long run. But it does mean that valuation still matters. Popularity is not protection.

2. The Passive Investing Paradox

Joel Greenblatt said it best:

“If you just keep buying a basket without looking at what’s in it, you’ll end up overpaying for some things and ignoring others.”

That’s the paradox of indexing. The more money that flows into ETFs, the more capital gets allocated mechanically, based on company size—not business quality, growth potential, or valuation.

If Apple grows bigger, it gets a bigger slice of your ETF—even if it’s already overpriced. You’re no longer investing in companies. You’re investing in momentum. And that’s where things can break down.

3. Why ETF Trends Create Better Mispriced Opportunities

Here’s the part that excites me—not just as a skeptic of full ETF strategies, but as someone who believes in intelligent investing:

• 📉 ETFs don’t discriminate. They buy based on size, not on merit.
• 📊 This leads to price distortion. Overvalued companies receive more inflows just for being large.
• 🔍 This creates inefficiencies. Smaller or less popular companies may be undervalued or ignored.

The result? A growing gap between price and value—perfect for patient, research-driven investors. The more passive investing dominates, the more fertile the ground becomes for value investors seeking mispriced assets.

4. What’s the Smarter Alternative?

Let me be clear: ETFs aren’t bad. They’re a powerful tool for low-cost, broad exposure. But relying solely on them may leave you exposed to hidden risks—especially in today’s concentrated markets.

The smarter approach? Consider a hybrid strategy:

• ✔️ Use ETFs for efficient exposure to large segments of the market.
• ✔️ But complement them with individual stock picking—specifically through value investing.

Value investing is the strategy of buying companies trading below their intrinsic value. It focuses on fundamentals like earnings, assets, and long-term growth—not hype or momentum.

As more money flows blindly into ETFs, price distortions become more common—meaning value investors are better positioned than ever to outperform. While the index buys everything, value investing lets you selectively buy what’s truly worth owning. Here is an example of how a value stock ( Ametek full stock analysis here) can outperform an Index:

5. Final Thoughts: Outsourcing Your Future Isn’t a Strategy

There’s a difference between keeping things simple and giving up control. A full ETF strategy sounds rational. But rational isn’t always optimal—especially when it becomes the default choice for everyone.

Markets reward those who think independently. And if too much of the world is investing on autopilot, that means the edge is shifting—to those who slow down, look closer, and do the work.

In the end, your retirement isn’t an ETF. It’s your life. Treat it accordingly.