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Vanguard Is Growing Faster Than Everybody Else Combined

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Re: Vanguard Is Growing Faster Than Everybody Else Combined

#51

Post by ak217 »

stygiansonic wrote: post #44
NTDF9 wrote: post #9

Here's a question for someone more savvy than me. What happens if the vast majority of stock investments end up in vanguard funds? In an economic crises, will everyone try to sell the same set of funds and will crash the funds themselves?

This doesn't answer your question directly, but Matt Levine has written some great articles, in particular, about index funds and their effect on the market. Here's one: [1] "Second: One of my little stock-market obsessions is that index funds free-ride on the work done by active investors. Someone needs to make decisions that allocate capital to businesses. A world in which everyone indexes, and in which no one thin…

This is an absolutely crucial point that is not discussed nearly enough in the context of passive investing. Thanks for the link, I didn't know Matt Levine had stated it so eloquently already.

A tangentially related point is that membership in e.g. the S&P500 imparts a big financial advantage to companies for a somewhat arbitrary reason, due to passive investing.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#52

Post by askafriend »

debatem1 wrote: post #33
tim333 wrote: post #17

Earlier quoted context omitted.

You've got to take in to account that Vanguard doesn't actually do much - just buy stocks on your behalf and charge 0.12% for doing so. If it stopped doing that because some other operator was doing it for 0.08% it wouldn't be a big deal. The bigger deal would be if the general market collapsed for some reason but that would affect everyone, not just Vanguard.

Ok. I'm curious why you're telling me this. What's your motivation? There's certainly no point in arguing with me, since I'm both reasonably poorly informed and aware of it; I have made no bones about the fact that my post was unserious. Yet you leap to the defense of what should, after all, be a very unexciting thing. And you aren't alone in doing so. That, like this breathless article, is mildly troubling to me. Th…

> Yet you leap to the defense of what should, after all, be a very unexciting thing.

I actually think finance is interesting to read about and it can be exciting to try to make sense of the chaos.

If all of this really was that boring, you probably wouldn't have even clicked to read the comments!

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#53

Post by icebraining »

debatem1 wrote: post #33
tim333 wrote: post #17

Earlier quoted context omitted.

You've got to take in to account that Vanguard doesn't actually do much - just buy stocks on your behalf and charge 0.12% for doing so. If it stopped doing that because some other operator was doing it for 0.08% it wouldn't be a big deal. The bigger deal would be if the general market collapsed for some reason but that would affect everyone, not just Vanguard.

Ok. I'm curious why you're telling me this. What's your motivation? There's certainly no point in arguing with me, since I'm both reasonably poorly informed and aware of it; I have made no bones about the fact that my post was unserious. Yet you leap to the defense of what should, after all, be a very unexciting thing. And you aren't alone in doing so. That, like this breathless article, is mildly troubling to me. Th…

You're reading way too much into the motivations for comments. The simplest explanation is usually the best: https://xkcd.com/386/

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#54

Post by sparky_z »

theodorton wrote: post #24
tim333 wrote: post #12

Earlier quoted context omitted.

If everyone sells then the market will go down as it does now. It doesn't make much difference if that happens via a fund holding or not.

You can't sell without having someone buying.

Hence why the price goes down until someone does.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#55

Post by ajdlinux »

jordanthoms wrote: post #25

How does control/governance for Vanguard actually work? It's apparently owned by the investors in the funds, but I own some ETFs through Vanguard and I've never seen a proxy form. Very happy with the service, just curious about that aspect.

My understanding is that individual fund investors will never see a proxy form - the fund's decisions on how it will vote are determined by the managers.

Also, take a look at https://about.vanguard.com/vanguard-proxy-voting/

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#56

Post by gabemart »

Animats wrote: post #48

With index funds so big, who determines prices? An index fund tied to the S&P 500 just buys stocks in the proportion that they're in the S&P 500. The price of the stock plays no role in that decision. At some point, this has to create problems, but so far it hasn't. It does mean the active traders, who are basically moving the same money around all day, have an outsized influence on prices. Index funds are so success…

I had assumed - perhaps incorrectly - that as more and more money is invested in index funds and similar passive vehicles, it becomes increasing easy to beat the market as an active trader.

My thinking goes like this - as less money in invested actively, the market becomes less efficient at pricing. As the market becomes less efficient at pricing, it becomes easier to make money as an active trader. As it becomes easier to make money as an active trader, more money is invested actively, and the market becomes more efficient at pricing.

I may be using "active trading" incorrectly -- I just mean any kind of non-passive trading, both long and short term. But presumably, any kind of active trading theoretically increases the pricing efficiency of the market?

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#57

Post by loeg »

Animats wrote: post #48

With index funds so big, who determines prices? An index fund tied to the S&P 500 just buys stocks in the proportion that they're in the S&P 500. The price of the stock plays no role in that decision. At some point, this has to create problems, but so far it hasn't. It does mean the active traders, who are basically moving the same money around all day, have an outsized influence on prices. Index funds are so success…

> With index funds so big, who determines prices? ... At some point, this has to create problems, but so far it hasn't.

Any active trader remaining in the market. Fortunately, active traders still make up a large part of the market. And the bigger indices grow, the larger the opportunities for active traders to profit. It's not a real problem — it's self-correcting.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#58

Post by bsder »

gabemart wrote: post #56
Animats wrote: post #48

With index funds so big, who determines prices? An index fund tied to the S&P 500 just buys stocks in the proportion that they're in the S&P 500. The price of the stock plays no role in that decision. At some point, this has to create problems, but so far it hasn't. It does mean the active traders, who are basically moving the same money around all day, have an outsized influence on prices. Index funds are so success…

I had assumed - perhaps incorrectly - that as more and more money is invested in index funds and similar passive vehicles, it becomes increasing easy to beat the market as an active trader. My thinking goes like this - as less money in invested actively, the market becomes less efficient at pricing. As the market becomes less efficient at pricing, it becomes easier to make money as an active trader. As it becomes eas…

HFT is very efficient. Individuals will simply not beat HFT unless they actually have insider information.
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