Bogle Sounds a Warning on Index Funds
1–10 of 234 posts
Re: Bogle Sounds a Warning on Index Funds
#2A bit click-baity, but the warning here from the father-of-index-funds is not that they've become a bad investment, but that their popularity is leading toward a handful of financial institutions holding controlling interests in most of the largest companies. Pretty interesting unitended consequence.
Re: Bogle Sounds a Warning on Index Funds
#3This is fascinating. Selfishly though this seems to signal for investors of index funds (such as myself) that they will only continue to be good investments unless major government regulation occurs.
Does anyone know of any investment risk to index funds if everyone is now doing it?
Re: Bogle Sounds a Warning on Index Funds
#4A bit click-baity, but the warning here from the father-of-index-funds is not that they've become a bad investment, but that their popularity is leading toward a handful of financial institutions holding controlling interests in most of the largest companies. Pretty interesting unitended consequence.
He is mentioned here pretty regularly, so many may already be aware, but Matt Levine discusses this and its variants a lot in his newsletter, most of the time under the heading "Should index funds be illegal?"
Re: Bogle Sounds a Warning on Index Funds
#5This is fascinating. Selfishly though this seems to signal for investors of index funds (such as myself) that they will only continue to be good investments unless major government regulation occurs. Does anyone know of any investment risk to index funds if everyone is now doing it?
I don't consider myself very savvy in investing, but I guess if "half of all stocks" are owned by index funds that's a concentration of ownership that might be considered unnatural at best.
I didn't read past the paywall but one good thing if more and more people own index funds then they are participating in the success of those corporations represented in that index. Might tend to tone down some of the shrill agitation that everything "corporations" do is evil and greedy.
Re: Bogle Sounds a Warning on Index Funds
#6A bit click-baity, but the warning here from the father-of-index-funds is not that they've become a bad investment, but that their popularity is leading toward a handful of financial institutions holding controlling interests in most of the largest companies. Pretty interesting unitended consequence.
I have a hard time seeing it as unintended. If you are not promising any differentiation between yourself and the index than the only thing to really compete on is cost. There are economies of scale in finance, specifically if you need to optimize solely for AUM.
Re: Bogle Sounds a Warning on Index Funds
#7If the stock market becomes dominated by copycats copying each other, can it price equity risk accurately?
Re: Bogle Sounds a Warning on Index Funds
#8This is fascinating. Selfishly though this seems to signal for investors of index funds (such as myself) that they will only continue to be good investments unless major government regulation occurs. Does anyone know of any investment risk to index funds if everyone is now doing it?
one risk is that if too many people are invested in index funds (passive, not buying or selling based on new information), then the price of those stocks is determined by a small group of active investors
Re: Bogle Sounds a Warning on Index Funds
#9This is fascinating. Selfishly though this seems to signal for investors of index funds (such as myself) that they will only continue to be good investments unless major government regulation occurs. Does anyone know of any investment risk to index funds if everyone is now doing it?
Index fund investors are classified as "passive investors," while others are "active investors."
The main investment risk to index funds growing is that, if everybody is a passive investor, then the passive investors are worse off as there are very few active investors who actually try and value companies appropriately.
On the other hand, if the market is littered with active investors, then the market is likely more efficient and 'correct', and so you're (probably) better off as a passive investor.
Re: Bogle Sounds a Warning on Index Funds
#10Is 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 representation based on market cap would come out to.
I'm not sure if a single holder of funds can cast "partial votes" in each direction though.
Either way, it seems like a problem that could be fixed through technology.