RMDs force you to withdraw money from your 401(k) when you turn 73. Example: someone with $4.5 million must withdraw $170,000 that year. At 83, that same person must withdraw much more. This means automatic selling.

The 401(k) system started in 1978. Baby Boomers mostly have pensions. Generation X will be the first to retire mainly on 401(k) assets. And they face Required Minimum Distributions at age 73.

Every month, billions of dollars from paychecks flow into these passive funds. Automatically. Regardless of valuations. Regardless of market conditions. This has driven assets in TDFs up every single year since 2006.

Target Date Funds automatically adjust risk based on retirement year. Someone retiring in 30 years: 90% stocks, 10% bonds. Someone retiring in 5 years: 60% stocks, 40% bonds. Most TDFs are made up of passive index funds.

Traditional models use a multiplier between 0.05 and 0.1. That means buying 10% of the stock market only raises prices by 0.5%. But a 2021 paper called 'The Inelastic Markets Hypothesis' found the multiplier could be as high as 5.

But look what happened when money flowed out. ARK's performance chart and Assets Under Management chart look nearly identical. No obvious lead or lag. Money in = prices up. Money out = prices down.

ARK's top holdings from 2019-2020: Tesla: +1,038% Roku: +921% CRISPR: +412% Zillow: +347% Block: +280% The Nasdaq was up 102% in the same period. That's incredible outperformance.

Concentrated ETFs make this volatility worse. Cathy Wood's ARK Innovation ETF became wildly popular in 2020. Money flooded in, and the fund had to buy its holdings. The result? Massive price increases.

Dell closed Thursday as a $205 billion company. It opened Friday as a $273 billion company. That's a 33% jump overnight. The stock had already doubled since March.

Snowflake closed trading as a $60 billion company on a Wednesday. It opened Thursday as an $82 billion company. That's a $22 billion increase overnight with no fundamental change in the business.

Terry Smith changed his strategy after years of quality investing success because of the structural problems passive investing is causing. I want to look at the massive volatility passive investing is creating today. And why the U.S. retirement system might make it much worse.

Stock prices are set by trades. Every trade needs a buyer and a seller. Prices move when someone crosses the spread between the bid and ask. Whoever is trading sets the price.

Passive now controls 60% of assets under management. But here's the kicker: Active managers were 80% of trades in the 1990s. Now they're just 10%. The people reading reports and analyzing companies are a tiny minority.

Terry's explanation: a feedback loop. Passive does well → gets popular → takes in capital → buys more of what it owns → prices go up → passive does better → takes in more capital. Meanwhile, active funds are bleeding capital and selling.

In the UK: Vanguard's tracker returned 66% over 5 years. The average equity fund returned just 32%. That's not normal. Active and passive used to track closer together. What happened?

Fundsmith has outperformed long-term. But it's underperformed for 5 straight years. Terry says the market has shifted away from fundamentals and toward momentum. He's not wrong. Look at how momentum has crushed everything else lately.

What makes a "good company" for Terry? • Return on capital employed of 15-20%+ • Wide moats with pricing power • Strong free cash flow conversion He focuses on quality businesses that dominate their markets.

Terry Smith runs Fundsmith. £12 billion under management. 13.1% CAGR after fees since 2010. His philosophy is simple: • Buy good companies • Don't overpay • Do nothing Patience has been his edge.

Terry Smith just turned over 50% of his portfolio in 6 months. He's called "the English Warren Buffett" and rarely trades. Why the dramatic shift? He believes the market's underlying structure is changing. Here's what he's seeing:

You can't predict the future. You also can't calculate the odds of what already happened in the past. All you can do is make good decisions with incomplete information.

Some of the best investment advice I've seen. Some of these took me years to learn the hard way.

Not all great companies stay great. The difference? A moat. Here are Pat Dorsey's 4 Moat Categories to help you find businesses built to last:

This chart covers 60+ years of data. The green bars (dividend growth) are taller than the gray bars (inflation) in almost every period. Even during the worst inflation decades, dividends eventually caught up. Dividend growth is a long-term inflation hedge.

It's amazing how well Buffett's net worth tracks the exponential curve you'll see on a compound growth calculator.

Wise words from Peter Lynch

6 Investing Rules Every Investor Needs to Know

How to analyze stocks:

Michael Burry's Investment Strategy One-Pager •  Buy roadkill • Sell when it looks less bad • Care little about general market • Focus on FCF & Enterprise Value • Hold 12-18 Stocks • Buy within 10-15% of 52-week low

“My only plan is to keep coming to work each day. I like to steer the boat each day rather than plan ahead way into the future.” - Henry Singleton

The biggest investment mistake I ever made? Selling my winners too soon. Imagine selling Amazon when it was down 93% in 2001. Here's why that's so costly (and when you actually should sell):