71–80 of 324 posts
Not knowledgeable on these matters, so my money is in index funds. Obviously a lot of other people are in the same category as myself. The article seems to be saying we'd all be better financial citizens if we put our money into actively managed funds, or did our own investing. The latter is out of reach for most people, and with respect to the former it's somewhat puzzling that managed funds can't consistently outpe…
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I think the contrast is between active and passive funds. If your money is in an active fund, there's a manager exerting his intelligence in trying to make good choices with your money. This effort is beneficial, as it helps the market find the right prices for assets. A passive fund adds money into the system, but it doesn't add any intelligence - it relies on the intelligence of the current market participants. As…
> As more and more money switches from active to passive, we have more and more money relying on less and less intelligence. That's assuming that the mutual fund managers who are being moved away from are all contributing their own unique information to the market, as opposed to repeating textbook business analysis techniques. If the fund managers that survive are smarter than the ones being replaced by indices, the…
Anyone can go all-in on red five times at the roulette table. One out of every 33 players will see 3100% returns from this investment 'strategy'!
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Once indexing gets to be a certain size, you run into the "markets irrational longer than you can stay solvent" issue at a much higher level. Active management "correction" doesn't really work if active managers are a much smaller portion of the market or no longer around at all.
Holding doesn't change the price: buying moves it up and selling moves it down. An index fund holding 50% of all shares on the market but not trading them would have no influence at all on prices.
Not knowledgeable on these matters, so my money is in index funds. Obviously a lot of other people are in the same category as myself. The article seems to be saying we'd all be better financial citizens if we put our money into actively managed funds, or did our own investing. The latter is out of reach for most people, and with respect to the former it's somewhat puzzling that managed funds can't consistently outpe…
Earlier quoted context omitted.
> index funds can't work after a certain amount of the money poured into the system is managed by index funds That's not true. They'll still function just fine. What will likely change is that they will begin to underperform other strategies, including different types of indexing and active investing. At that point the market will self-correct and simple indexing will fall out of favor.
Index funds have become successful since they've performed well compared to active investment funds. Why would the active investors suddenly get better at guessing the future?
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All types of investment in every country is subject to financial repression. You could own gold, but wait ! any gain is taxed as income ( not capital gain ). Carrying it around has stiff penalties. "You invest in how we say you invest" - Uncle Sam.
Carrying it around has stiff penalties. What are the penalties for carrying bullion?
Can someone who understands investing well explain what he’s saying in terms that someone who isn’t knowledgeable about this could understand? I kind of think he’s saying that everyone is just shoveling their money into index funds without thinking about it and this leads to incorrectly valued stock that will correct in the form of a crash at some point. Is that sort of the gist of it?
Most folks here are focusing on Burry's comments regarding price-discovery. However there is another huge point: Liquidity risk. To understand his point, you have to know the gory details of how an ETF operates. First: When you buy a ETF share for the S&P 500 (iShares, Vanguard etc), the share is not backed by all 500 S&P components. Virtually all the large-number component ETFs are using a sampling of shares to matc…
There is one piece of information missing. Did the onset of index funds add more money to the pool? What I mean by that is did people move out of regular stocks into Index funds or did they move out of mutual funds into them? How much is the difference?
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Take a look at opportunity zone funds today. You can pull your money out and pay zero capital gain taxes for seven years. Then get a 15% discount on your capital gains at that time. All returns you realize from the fund are capital gains tax free. The benefits end this year.
I know a bit about Opportunity Zones (roommate bought property that was subsequently designated one, to his delight), but not about the funds. Do you have any particular recs on where I can read up on them?
Annual investment management fee 0.75% Annual tax and accounting fee 0.45% Annual carried interest / promote 15% over 8% return
Maybe it's not as high when you consider that they purchase the property directly, but it still seems a bit too risky to lock myself into those high fees for 10 years.
I think the main benefit is the 7 year deferment of your capital gains, which given that your money will be compounding from that point onward, is a pretty significant break if you have a lot of gains you haven't triggered yet.