21–30 of 73 posts
Earlier quoted context omitted.
I don't think shorting would be a very good strategy for passive, long term investors due to the associated costs (margin, dividend payments) and the unlimited risk.
There isn't unlimited risk because the exposure to tech is hedged out by the opposing long/short positions (as are the dividend payments). Agreed that this isn't practical for the average investor though.
This is an inherent property of all market cap weighted indexes. An alternative approach is equal weighted indexes, which have historically outperformed market cap weighted indexes. There's no free lunch though: this is a case of your typical risk/reward tradeoff. Equal weighted funds are more risky (volatile), but have higher historic returns than market cap weighted funds. Some of them feature equal weighting acros…
[1] such as ones based on the Dow Jones U.S. Completion Total Stock Market Index which holds the 500th to 5000th largest companies
Earlier quoted context omitted.
There isn't unlimited risk because the exposure to tech is hedged out by the opposing long/short positions (as are the dividend payments). Agreed that this isn't practical for the average investor though.
Are they tracking the same tech stocks in a proportion that cancels out?
This is an inherent property of all market cap weighted indexes. An alternative approach is equal weighted indexes, which have historically outperformed market cap weighted indexes. There's no free lunch though: this is a case of your typical risk/reward tradeoff. Equal weighted funds are more risky (volatile), but have higher historic returns than market cap weighted funds. Some of them feature equal weighting acros…
Seeing this article advising "reducing your exposure to tech by selling your tech stocks" assumes that you have no choice to participate other than buying. They are looking at half of the market(buy-side) and ignoring the equal-sized selling-side of the market. Stocks going down == Short the market. Stocks going up == long the market. The direction is unimportant, the volatility is absolutely important - and there is an awful lot of it(volatility) at the moment.
"Tech" in this case is an overly broad classification. Apple, Amazon, and Facebook are all very different businesses and should not have correlated performance.
Every successful business has to be “tech” in this century. Tech is how you achieve high scale
The growing peril is only for long positions . Peril for long positions is profit for short positions. Seeing this article advising "reducing your exposure to tech by selling your tech stocks" assumes that you have no choice to participate other than buying . They are looking at half of the market(buy-side) and ignoring the equal-sized selling-side of the market. Stocks going down == Short the market. Stocks going up…
(I use Hedgeable which is the most complex robo-advisor, but as they say they hedge long instead of using options. Please sign up, I’d be inconvenienced if they went out of business!)