Terry Smith warns index funds risk investment disaster

Fund manager Terry Smith warns that the growing popularity of index funds could lead to a major investment disaster. This warning follows a year where his Fundsmith Equity fund returned only 0.8%, significantly underperforming the MSCI World index's 12.8% gain. Smith attributes this to the dominance of a few tech stocks and the passive investment trend. Smith believes passive funds distort markets by pushing up valuations, especially with the rise of AI companies, and expresses concern about the long-term consequences.