= 27d567bc2d48d9f40e9ccc20ea370b15)
gwern comments on [LINK] Bets do not (necessarily) reveal beliefs - Less Wrong
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (22)
Buy shares in competing companies, maybe?
This is unlikely to be a good strategy, because competitive stocks are usually correlated, and market participants see the bankruptcy of one company as possibly foretelling a weak market for the competitors' products also. Unless it's a very specific and unusual situation.
In fact, some think it is best practice for people whose future earnings are highly correlated with a particular market sector to reduce any stock ownership they have in that sector to reduce their risk. E.g. software developers should have portfolios that underweight software or technology. It has theoretical support, but hardly anyone in the real world does this because of the added complexity as compared with buying index funds and because of outdated thinking around retirement planning.
It's even harder to do when you're young and your portfolio is 100% cash (and human capital).
Is there a reason a company doesn't offer S&P- products - S&P minus a specific industry. If the bank diversified their customer they could just buy straight index funds and then distribute the returns differentially.
Sector ETFs are already pretty inexpensive on an expense ratio basis. Vanguard's sector ETFs for example have expense ratios of 0.14%, which compares with an expense ratio of 0.05% for the cheapest S&P500 ETF. A bank wouldn't be able to do it any cheaper, realistically. Someone could offer ETFs that exclude particular sectors, but it just hasn't been done, and I still don't think it would be cheaper because of economies of scale for the funds that currently have the most capital.
You do have to have a certain amount of capital to successfully diversify using ETFs, obviously, but the bank doesn't really care about you either if you aren't investing at least a few thousand.