71–80 of 86 posts
I'm not sure whether people understand just how big of a problem this is. Resilient economies are well-balanced economies. When Big Tech falls - and it will eventually fall, because no industry is immune to corrections or busts - - the effect on the wider economy will be all the greater. The greater a share of the stock market that Big Tech holds, the larger the blast radius their failure will impose on the wider eco…
>I'm not sure whether people understand just how big of a problem this is. Resilient economies are well-balanced economies. You seem to be under the misconception that the stock market somehow reflects the actual economy, in fact you seem to think that the stock market is the economy. Those "top 5" companies taken together are less than 5% of the actual US economy, regardless of whichever way you want to calculate th…
Counter-intuitively, investing in the Top 10 stocks has actually gotten you worse results than the market average.
If you took Top 10 stocks at the beginning of each decade (1920, '30, …, 2010), and followed how it did for that decade (e.g., 1920-1929) it would done worse than the market average (by 1.51% annually on average):
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An index ETF won’t have tax consequences until you sell the ETF. An index mutual fund can cause you to have to pay taxes: https://money.usnews.com/investing/investing-101/articles/et... > Since mutual funds trade directly through the fund manager, the manager may need to sell shares of the fund's investments to generate cash needed to cover redemptions. This causes mutual funds to buy and sell within the fund more fr…
Assuming that it is held in a taxable account. For most people, for most of their portfolio, it will probably held in a tax-sheltered account (e.g., 401(k) retirement in US). If you've maxed out all your sheltered accounts, and are worried about dealing tax events in non-sheltered ones, that's a pretty good position to be in—financially speaking.
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Assuming that it is held in a taxable account. For most people, for most of their portfolio, it will probably held in a tax-sheltered account (e.g., 401(k) retirement in US). If you've maxed out all your sheltered accounts, and are worried about dealing tax events in non-sheltered ones, that's a pretty good position to be in—financially speaking.
This is a silly statement - there’s plenty of middle class people who hold mutual funds who are hit with capital gains taxes every year from distributions from the fund.
> Approximately 6 in 10 households in the United States own securities investments—typically through taxable accounts, IRAs or employer-sponsored retirement plans. However, this figure drops to a little over 3 in 10 if only taxable investments are considered. Households that own taxable accounts are more likely to be older, affluent, college educated and white relative to households with only retirement accounts or households without investment accounts.
* PDF: https://www.sec.gov/spotlight/fixed-income-advisory-committe...
The 3-in-10 would also have sheltered accounts:
> Importantly, most of these taxable investor households (89 percent) also own a retirement account like a 401(k) or IRA.
I stand by my statement: most people don't have to worry about tax events in mutual funds, and those that are in the situation have a 'good problem'.
I'm not sure whether people understand just how big of a problem this is. Resilient economies are well-balanced economies. When Big Tech falls - and it will eventually fall, because no industry is immune to corrections or busts - - the effect on the wider economy will be all the greater. The greater a share of the stock market that Big Tech holds, the larger the blast radius their failure will impose on the wider eco…
Historical data says otherwise. Right now the five biggest make up 23%, in April they were 21.38%. In 1964 the five biggest made up 27.60%: * https://theirrelevantinvestor.com/2020/04/21/the-only-thing-... In 1964, AT&T alone made up 8.90% and in 1969 IBM alone made up 9.00%. The author of this story needs to look into history more and go back more than just thirty years. Companies and industries rise and fall and ha…
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Does anything change if you factor in the dividends of those 5 companies?
Dividends are around 1-5%, large caps are closer to 1% (or 0) (AAPL 0.89%, MSFT 1.04%)
I'm not sure whether people understand just how big of a problem this is. Resilient economies are well-balanced economies. When Big Tech falls - and it will eventually fall, because no industry is immune to corrections or busts - - the effect on the wider economy will be all the greater. The greater a share of the stock market that Big Tech holds, the larger the blast radius their failure will impose on the wider eco…
I have no knowledge in this field whatsoever, but is this more an indication that we shouldn't be using the S&P 500 and similar indices as an overall indicator of the performance of the economy, is there value in looking at these indices absent of Big Tech?
Also, a major part of the problem in my view is the blind indexing of equities that most investors use for the bulk of their portfolio. Market cap weighting essentially results in what essentially a momentum overlay: new money is allocated disproportionately to the stocks with the highest market cap, resulting in those stocks going up even more.
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And it isn't just FAANG. Look at Disney and Comcast and all the other conglomerates. The SEC and FTC have totally failed our country in the 21st century.
You may be interested in the book Goliath by Stoller: > Americans once had a coherent and clear understanding of political tyranny, one crafted by Thomas Jefferson and updated for the industrial age by Louis Brandeis. A concentration of power, whether in the hands of a military dictator or a JP Morgan, was understood as autocratic and dangerous to individual liberty and democracy. This idea stretched back to the coun…
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This is a silly statement - there’s plenty of middle class people who hold mutual funds who are hit with capital gains taxes every year from distributions from the fund.
These 'taxable people' are in the minority: > Approximately 6 in 10 households in the United States own securities investments—typically through taxable accounts, IRAs or employer-sponsored retirement plans. However, this figure drops to a little over 3 in 10 if only taxable investments are considered. Households that own taxable accounts are more likely to be older, affluent, college educated and white relative to h…
Earlier quoted context omitted.
I have no knowledge in this field whatsoever, but is this more an indication that we shouldn't be using the S&P 500 and similar indices as an overall indicator of the performance of the economy, is there value in looking at these indices absent of Big Tech?
correlation between all stocks in the S&P 500 is so high that removing big tech makes little difference. Also, a major part of the problem in my view is the blind indexing of equities that most investors use for the bulk of their portfolio. Market cap weighting essentially results in what essentially a momentum overlay: new money is allocated disproportionately to the stocks with the highest market cap, resulting in…
New money is allocated exactly proportionally to a stock's market cap in a cap-weighted index fund, by definition. New money into such funds can't disproportionally increase the price of one stock in the index versus another.