Thesis: Index Funds Are Built for the Past
The Illusion of Safety
Index funds became the holy grail of “smart investing.” Buy the S&P500, sit back, and watch your wealth grow.
It worked — in an era when markets moved linearly, information was scarce, and compounding was the only edge the average investor could access.
But that playbook belongs to the 20th century. In the 21st, it’s a liability.
Why? Because index funds are designed to track what already exists. They are a mirror of the past, not a lens into the future. By definition, they overweight incumbents and underweight disruptors. You only get exposure to the companies that already won yesterday’s battle.
And if you believe the next 20 years will look like the last 20, that’s fine. But if you believe we’re entering a world of exponential shifts — AI, biotech, energy transitions, programmable money — then anchoring yourself to “what was” is the slowest way to die financially.
Power Laws Rule, Not Averages
Innovation doesn’t distribute returns evenly. It follows power laws.
A handful of companies drive nearly all the value creation in each cycle: Amazon in e-commerce, NVIDIA in AI infrastructure, ASML in chips, Ethereum in Web3.
Index funds take those compounding machines… and bury them under hundreds of mediocrities.
Your capital doesn’t flow into the future. It gets diluted into the noise of companies with declining relevance.
This is the dirty secret: diversification in index funds is not protection. It’s paralysis.
The Problem of Lag
When disruption happens, index funds are always late.
Think about Tesla. By the time it was meaningfully weighted in the S&P500, the asymmetric gains were already gone. The index doesn’t buy conviction. It buys consensus — after the fact.
In fast-moving industries, that lag can mean missing 80–90% of the upside. You don’t build wealth by showing up late to the party.
The Myth of “Low Cost”
Advocates say: “But index funds are cheap. Fees are near zero.”
True. But cheap access to mediocrity is still expensive in opportunity cost.
If a conviction portfolio compounds at 15–20% annually, and your index fund compounds at 7–8%, the delta is enormous. Over 20 years, €100k becomes €466k in the index… or €1.9M with conviction.
That’s not a margin. That’s the difference between average and wealthy.
Conviction Beats Consensus
At Altvalue Capital, we reject imitation. We don’t chase averages. We build conviction portfolios that anticipate the future.
That means concentrated exposure to deep tech and foundational infrastructure:
Semiconductors → the picks and shovels of AI and every digital industry.
Artificial Intelligence → not the hype layer, but the infrastructure and enablers.
Biotech & Health → where biology meets computing, redefining longevity.
Energy & Sustainability → the systems powering the next industrial cycle.
Web3 with fundamentals → programmable economies, not speculation.
This isn’t speculation. It’s asymmetric positioning.
Long-Term Thinking in an Exponential World
The paradox of exponential change is this: the biggest winners look risky in the short term and obvious only in hindsight. Index funds can’t touch them until they are already “obvious.”
We position earlier — with discipline, fundamentals, and long-term patience. We rebalance quarterly, cut noise, and double down on conviction.
Our goal isn’t to “match the market.” Our goal is to compound capital at 15–20% annually for decades. That’s how you double wealth every 4–5 years without chasing hype.
The Real Risk
The real risk is not volatility. The real risk is irrelevance.
Owning yesterday’s economy won’t protect you in tomorrow’s world.
Passive investors are told they are being prudent. But prudence without foresight is just complacency.
Conclusion: Past vs. Future
Index funds are built for the past. They protect against yesterday’s risks and guarantee yesterday’s returns.
Conviction investing is built for the future. It embraces asymmetry, power laws, and the reality that a few companies will define the next 20 years.
At Altvalue Capital, we don’t imitate. We anticipate.
Because wealth isn’t built by blending in. It’s built by having the courage to stand apart.
👉 The average investor buys safety. The visionary investor buys tomorrow.