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Bogle Sounds a Warning on Index Funds

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Re: Bogle Sounds a Warning on Index Funds

#201

Post by walamaking »

pedrocr wrote: post #196

This seems quite easy to fix. Just give me the option of voting my shares in the underlying companies of the index funds I own. I just want to own the market average but I'm happy to be an activist investor in the decisions I happen to care about. Index funds may even want to differentiate themselves by having good research teams to advise me on what to decide and having convenience options where I get to set specifi…

Have you ever voted before? Assume 10 questions per company. Exposure to S&P 500 would mean 5,000 questions to answer. I don't know what the general stats are, but some proxies I've seen have 20+ questions.

Now, you will most likely be uninformed about most of the decisions that need to be made, which lead to your 2nd point about default options suggested by the index fund manager. But that just circles back to Bogle's points in the article. Also, with index fund costs at rock bottoms, good luck getting quality research into your voting options.

Re: Bogle Sounds a Warning on Index Funds

#202

Post by refurb »

thisisit wrote: post #105
refurb wrote: post #53

Earlier quoted context omitted.

Yet another great example of "race to the bottom" benefiting consumers. Not sure why it's used in a negative way all the time.

Because eventually businesses wake up to the fact that they need to make money. And they do it by going the absurd route. For example, online help is free but if you need to talk to a human being support, give us $10 a call or something. And while an average consumer might not be affected, people who are actually affected end up a nightmarish situation.

But that's just running a business poorly and you'll likely lose customers over it.

Re: Bogle Sounds a Warning on Index Funds

#203

Post by pedrocr »

walamaking wrote: post #201
pedrocr wrote: post #196

This seems quite easy to fix. Just give me the option of voting my shares in the underlying companies of the index funds I own. I just want to own the market average but I'm happy to be an activist investor in the decisions I happen to care about. Index funds may even want to differentiate themselves by having good research teams to advise me on what to decide and having convenience options where I get to set specifi…

Have you ever voted before? Assume 10 questions per company. Exposure to S&P 500 would mean 5,000 questions to answer. I don't know what the general stats are, but some proxies I've seen have 20+ questions. Now, you will most likely be uninformed about most of the decisions that need to be made, which lead to your 2nd point about default options suggested by the index fund manager. But that just circles back to Bogle…

> But that just circles back to Bogle's points in the article. Also, with index fund costs at rock bottoms, good luck getting quality research into your voting options.

The alternative is active funds where you're already paying for exactly the same thing plus a bunch of compensation for underperformance to people who pretend to know what they're doing. Paying a research team is cheap in comparison and once funds are at <0.10% expense ratios making them cheaper isn't that big of a market advantage anyway. A good research team and interface would definitely make me pick a 0.10% fund over a 0.05% one for a life-long investment career. If I'm reading the numbers in the article correctly at the scale of Vanguard that's a cool billion dollars a year to provide research and systems.

Re: Bogle Sounds a Warning on Index Funds

#204

Post by bdhess »

a3n wrote: post #112
elsonrodriguez wrote: post #87

Earlier quoted context omitted.

Hijacking trucks filled to the brim with sensors sounds like a recipe for jail time. The logistics of stopping and looting a truck involves too many parties, and ensuring that each party is following enough security protocols to not be identified via face, vehicle, or gait will ensure that only a few small sophisticated heists will ever be successful.

Anecdata: a fellow driver told me the story of a truck stopped at a light in "a bad part of town." Thieves rushed the back of the trailer, cut the lock and opened the door, just in case there was something worth grabbing. Another, parked overnight with a load of electronics at the southern boarder. He woke up and discovered the trailer had been broken in to. Yet it didn't seem anything was missing. Maybe something "e…

> BTW, it "feels" unlikely that a judge or jury would convict based on gait analysis.

But it does seem plausible that gait analysis could lead to a suspect, who could be convicted (or more likely, plead out) on additional evidence discovered during an investigation.

Re: Bogle Sounds a Warning on Index Funds

#206

Post by randyrand »

lifeformed wrote: post #60
decimalst-s wrote: post #10

Is there anything legally preventing these funds from having some kind of system where you have fractional voting rights proportional to your number of shares in the mutual fund vs. the weight of the company in the index it represent? e.g. You have 100 shares of a mutual fund that has 1% of its holdings in some company- thus you have 1 vote for that company's shareholder ballot, or whatever the fractional representat…

The article says that this solution has unintended consequences too, since you are now transferring voting rights from the share owner, who cares about the long term performance of the company, to share renters, who generally just care about the short term, which is counterproductive. Although I'm not sure I get that - I don't quite see how the renter's would be especially more short sighted - it's not like the fund…

A share owner can sell at any time. As can a renter. Not sure I see a difference.

Re: Bogle Sounds a Warning on Index Funds

#207

Post by zjaffee »

ethbro wrote: post #76
hangonhn wrote: post #71

Earlier quoted context omitted.

Uh... not sure if that's actually the case. Trains are cheaper and actually faster over a long distance. The optimal way to ship is actually intermodal: ship for between countries/continents, trains for long trips over land, and then trucks for the last leg. They don't really compete with each other as much as they work together, especially since they have a standardized protocol for inter-process communication known…

> Of course electric automated trucks could change all that. Unmanned trucks crossing long distances of rural America sounds like a recipe for hijacking loads.

There are multiple mile long trains with only 2 people on board at any given time, unmanned trucks won't be a problem as they'd likely travel just travel convoys with a couple people overlooking the fleet.

Re: Bogle Sounds a Warning on Index Funds

#208

Post by rohit2412 »

savanaly wrote: post #163
fipple wrote: post #119

The summary: if Coke and Pepsi are owned by different guys, Coke will take an action that makes them an additional $1 million, even if (especially if) it causes Pepsi to lose $1 billion. Most commonly, cut prices. If the two companies are owned by the same guy, they have the incentive not to compete with each other since their owner cares about the sum of their profits. This is why one wouldn’t be allowed to acquire…

If Coke could take an action that would make them $1 million but cost Pepsi $1 billion, why wouldn't the two companies come to an agreement for Pepsi to pay Coke a one time sum of X where X is between $1m and $1b for Coke to not do it? A single entity owning both corporations should not be necessary for the efficient outcome to occur in this hypothetical.

https://www.theguardian.com/business/2011/apr/13/unilever-pr...

Re: Bogle Sounds a Warning on Index Funds

#209

Post by yborg »

hartator wrote: post #187

Author complains about high barrier of entry to create a new index fund, but all solutions he list are just even more barriers of entry. The common sense of not putting new laws until clear evil has been observed should be applied here.

>the common sense of waiting for a massive crisis before doing something by which time it is too late for millions of investors who lose everything

That is the conventional approach, I think Mr. Bogle is suggesting that we act to prevent such issues ahead of time for a change.

And the main barrier to entry he refers to is essentially the size of the established players. They have economies of scale that a new entrant would be hard-pressed to match. And the author is the man who essentially invented the index fund, and whose company, Vanguard, currently is the market leader in these products and has the most to gain from maintaining the status quo.

Re: Bogle Sounds a Warning on Index Funds

#210

Post by scott_s »

whack wrote: post #179
scott_s wrote: post #142

Earlier quoted context omitted.

Your comment still assumes active investors who are looking for value stocks. Index funds don't discriminate, they just buy stocks in the entire market.

Index funds don't discriminate against stocks, but they can discriminate against directors and executives who don't deliver their desired profits and returns. Ie, by voting them out. This is already starting to happen. See: https://www.barrons.com/articles/passive-investors-are-the-n...

I mostly read about passive firms voting more on special issues like climate change or good governance. Where did they they talk about voting out directors who didn’t deliver profits? (Honest question, I mostly read the article, then came back to it and hit a paywall.)
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