Tracing the Roots of Passive Investing Back to Medieval Italy

The video explores the evolution of financial products, starting with the Commenda contracts in medieval Italy, which allowed merchants to finance their journeys through a system of passive and active investors. These contracts are likened to modern ETFs due to their diversification and secondary market. The video also discusses the Equal Weight Index Fund from 18th century Holland, which offered a diversified bond portfolio in response to a financial crisis. The fund's low costs and liquidity issues are highlighted, drawing parallels to modern financial products.

What was the primary role of the passive investor in the Commenda contract?

• To manage the merchant's journey

• To provide two-thirds of the capital and receive half of the profits

• To provide one-third of the capital

• To receive all the profits

How did the Commenda contracts benefit smaller investors in medieval times?

• By allowing them to travel with merchants

• By ensuring they received all profits

• By giving them access to a diversified portfolio

• By providing them with free goods

What was the Unity Creates Strength fund primarily composed of?

• A diversified portfolio of bonds

• Stocks of the East India Company

• Commodities like gold and silver

• Real estate investments

What was a unique feature of the Unity Creates Strength fund regarding its security?

• It was backed by gold reserves

• It was insured by the government

• It was held in an iron chest with three locks

• It was stored in a bank vault

Why was the Unity Creates Strength fund considered an early bond index fund?

• Because it had high fees

• Because it allowed for active trading

• Because it had little room for active decisions

• Because it was focused on stock investments