81–90 of 324 posts
I assumed most knowledgeable investors abandoned that philosophy in the 80s/90s
Earlier quoted context omitted.
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?
Index funds work because weve been in a 20 year long bull market. If the market goes sideways for a decade, or down for a decade then active investing is alot more profitable.
The discussion of this on the Bogleheads forums, a community dedicated to low-cost investing primarily via indexing, provides an interesting counter-point to Burry's opinions: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=289284
Right or wrong, that must be one boring place.
[Re: downvotes, The post was just intended to convey that the thesis of "put your money in the lowest cost index funds using an allocation formulatically dictated by modern portfolio theory, and don't touch it for the next 35 years" would be unlikely to provide much fresh content.]
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?
Other replies were good. But I'll add my two cents. Index investors are basically free riders off the information and research generated by active investors. Indexing basically works pretty well because the market's efficient. An index investor just comes in and just pays whatever the current market price is and allocates in proportion to whatever current market valuations are. He doesn't even need to know anything a…
Throwing darts is cheaper and safer for them.
Index investors are only really messing with the market if there’s more capital chasing fewer goods than there otherwise should be if they were being “active”, which isn’t proven.
There are ways to get more diversity within indexing itself. eg: small cap index, value index funds. It seems like the bone of contention is that indexes track the entire market based on trading volume, and that is an existential risk given cap weighting. Many now invest in total market indices, which limits the impact of large cap companies. The "cap weighting" problem is a known issue in indexing and this is why yo…
https://www.invesco.com/portal/site/us/ria/etfs/strategies/e...
Earlier quoted context omitted.
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.
There's maybe some room for redeeming index value and "caching" that demand from within Vanguard, etc, but I tend to doubt this action wouldn't hit the market at all.
Isn't a big part of the issue with actively managed funds the fees, which usually wipe out any gains above index funds. Wouldn't the market correction be to close the delta in fees between active and passively managed funds to encourage more people to go the active route? A lot of the grousing about passively managed funds come from people who are running actively managed funds that charge huge fees to under perform…
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…
The article is claiming that index funds are an overhyped bubble, so of course they'll out perform actively managed funds that have better liquidity.
But when all the financial gurus are recommending investing in traditional securities (stocks and bonds), and millions of people wishing to get a leg up in life obey their advice, doesn't that turn the securities market in general into an "overhyped bubble"?
The market behavior and health of any investment, no matter how theoretically sound it is, will be strongly affected by investors' behavior around it. So the fact that index funds are popular (and thus perhaps inflated/overpriced) isn't a knock on the fundamental idea. It's merely an indication of a particular market situation at present.
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…
He says he's (reluctantly) doing active stock picking. He's a professional investor; I'm just some software engineer with a nest egg, which is 100% in index funds today. What should I be doing, as a schmoe who wants to save money?
There is also nothing wrong with adjusting the ratio of cash vs equities that you're accumulating (eg the share of your income going into the market vs going into cash in a span of time). It's the exact same safety vs risk lever that is commonly utilized in adjusting equities vs bonds as you get older. Some will call it market timing, it is not, as you are not attempting to time a top or bottom. With recession alarms going off in most global economic data, increasing your conservative posture is nothing more than being modestly prudent (and it doesn't have to be an extreme adjustment; if 100% of your net savings is going into the market now, changing that to 75/25 or 50/50 with cash, is entirely reasonable). Even Warren Buffett has turned hardcore conservative with this market, he's buying nothing and sitting on a $122b record pile of cash that is very much annoying him (by his own admission). The reason for his behavior, beyond the obvious blaring economic data, is that the valuations are terrible vs the growth we're seeing (both macro economy and corporate earnings); right now investors are paying a steep premium in most cases for the value they're getting. Buffett doesn't like the price he's paying for the value he's getting, so he has gone into bunker mode, as he has done prominently several times in the past. The simple, non-professional approach to that move, is to just make a reasonable adjustment to how much cash you're accumulating (which can obviously later be deployed if an opportunity presents; in the meantime you're likely to see a very modest inflation debasement to the fiat).