Announcement

Collapse
No announcement yet.

Are index funds communist?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Are index funds communist?

    https://www.bloomberg.com/view/articles/2016-08-24/are-index-funds-communist

    I thought this was an interesting read. Don't think it will change my passive habits, but it dose pose an interesting question of what happenes if everyone invests that way.

  • #2
    If ever there was such a high percentage of passively managed ownership that capital was no longer allocated efficiently, active managers could actually generate alpha and the market would shift into active management until they no longer could generate alpha any more. Ironically I think that active managers are too good at marketing that enough people will leave them and let them start actually generating alpha.

    Comment


    • #3
      Capital would actually be allocated much more efficiently is what is more likely to happen. This guy is all sour grapes. Its not really a passive vs. active shift right now, its a high cost to low cost. These managers cant justify their fees, any good work they do they charge enough that it takes any alpha away.

      There will still be alpha even if everyone is using etfs, the vehicles for speculation have simply changed, not human nature. These guys just wont be able to sit back and collect a fee for minimal effort.

      Comment


      • #4
        Just this past week I was watching a segment on CNBC where they said that 70+% of active managers aren't beating their index benchmark this year.  I thought that was a jaw-droppingly awful number, especially when you add 1-3% fees on top.  The commentator said "Money goes where it's treated well", and I think that just about sums it up.  When the market efficiency truly changes, when fees lower, then money will pour back into where the market sees a benefit, and that could one day be active management (but I still kind of doubt it).

        Comment


        • #5
          It seems the premise of the article is set on ignoring future individual company share value because no one would be paid to analyze.... To me this seems fallacious. Index funds would need to perform this function to determine market capitalization, as would the indexes like S&P etc. The instant that these functions aren't performed the market becomes inefficient and there's incentive to analyze again. Capitalism for the win.

          Comment


          • #6




            It seems the premise of the article is set on ignoring future individual company share value because no one would be paid to analyze…. To me this seems fallacious. Index funds would need to perform this function to determine market capitalization, as would the indexes like S&P etc. The instant that these functions aren’t performed the market becomes inefficient and there’s incentive to analyze again. Capitalism for the win.
            Click to expand...


            Exactly, it would actually be done much better and cheaper. If you have a good amount of time Philosophical Economics has a couple of excellent pieces on exactly these reasons. Excellent pieces on everything he does really, but they can be extensive.

            Comment


            • #7


              I thought that was a jaw-droppingly awful number, especially when you add 1-3% fees on top.
              Click to expand...


              Most years the number is even worse, at 85% below the benchmark.  However, those figures generally already include the fees.   Without the fees, many funds would beat the benchmark every year.

              Comment

              Working...
              X