A Profitable and Legal Way to Game the Stock Market

Post by breischl » Tue, Jul 07, 2015, 10:35 PM UTC

arielweisberg wrote: post #53

gohrt wrote: post #45

Earlier quoted context omitted.

The point of the article is that owning an index fund is NOT buy-and-hold -- the indexs sell to rebalance, and do so in poorly timed ways (that is, in hige fixed batches, contrary to standard advise to "drip"), exposing investors to trading waste that the indexes are designed to avoid -- undermining the purpose of the index fund. 0.2% waste is huge compared to the overhead fee of an index fund. VTSMX fee is 0.17%. >…

I did mean higher than, but that is because I incorrectly included the overhead of front running in the expense ratio when I think it would actually manifest as a failure to track the index. Some total market funds end up being a hair pricier (VTSAX and VFIAX are both .05% right now). Still, if you look at VFIAX it tracks the index perfectly despite front running so it is still nothing to worry about. The amount of m…

Post by nkassis » Wed, Jul 08, 2015, 3:32 PM UTC

gnopgnip wrote: post #60

lingben wrote: post #46

Just reading the title, I thought this would be another article about the Congressional loophole - where members of Congress can trade on insider information with impunity. https://firstlook.org/theintercept/2015/05/07/congress-argue...

When does insider information become public? When does trading on it become manipulating the market?

Post by Spooky23 » Wed, Jul 08, 2015, 10:06 PM UTC

ForHackernews wrote: post #39

jerf wrote: post #15

Earlier quoted context omitted.

It's a nice, clear example of the anti-inductivity of the market: http://lesswrong.com/lw/yv/markets_are_antiinductive/ The very act of noticing that something is a good strategy, and beginning to trade on it, will over time drain away the utility of the strategy, until it is useless or worse than useless. Tracking indexes is "big", and has some brute simplicity about it, but eventually the market will eliminate that…

> But that won't stop your metaphorical Dad from swearing up and down you need to buy index funds.... The argument isn't that passive index investing is some kind of perfectly optimal investing strategy, it's that it's the most practical strategy for 98% of normal small, individual investors. If you don't have millions of dollars to invest, and you have a real job that prevents you from spending all your time researc…