One chart that is sure to give Wall Street nightmares

Hang around financial markets these days and you're unlikely to go too long before hearing the phrase "passive investing."And notrend has reshaped the investing world over the last couple decades quite like the preference to park money in passive rather than active funds. A recent report from Deloitte said that in 2015, 72% of money invested into funds went into those of a passive vintage.Thischart, which comes to us from Bank of America Merrill Lynch's Michael Hartnett, shows the nearly $1 trillion investors have put in passive stock funds since 2009.The message from investors here is clear: We want the market return, and we want it cheap.Passive investingin contrast to active investingtypically describes money that seeks to earn the same return as a given index. An example would be a mutual fund that replicates the S&P 500.These funds are also typically lower-cost as the investment objective is to merely maintain a composition similar to an already-existing index and earn that same return. Active investing, on the other, is a fund that makes portfolio changes in an effort to outperform some benchmark, like the S&P 500 or Russell 3000.For investment professionals, however, passive investing means lower feesbecause paradoxically, what is good for investors is not good for those who manage investments.Vanguard's S&P 500 index fund, for example, currently charges 5 basis pointsor $50 on every $10,000 under managementfor investors. A 2015 study from Morningstar said the average expense across all funds in 2014 was 0.64%. And this is down from 0.76% in 2010.And so investing fees are coming down and coming down fast.We've written in the past that some strategists worry the rise of passive investing will create "investor socialism," with the idea here being a proliferation of investorspiling into funds that seek to earn merely the market return will suppress saidreturns (among other concerns).Others, meanwhile, think the "investor socialism" idea simply fails: the rise of passive funds doesn't come at the expense of the market's return but at the expense of the active managers who stink!Those concerned about socialism coming to financial markets, in other words, should cheer the rise of passive investing. It is, in its way, a pure representation of efficient markets at work.SEE ALSO:The laziest investing argument in the world gets blown upJoin the conversation about this storyNOW WATCH: What abandoned Olympic venues from around the world look like today
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