= 27d567bc2d48d9f40e9ccc20ea370b15)
James_Miller comments on Twenty basic rules for intelligent money management - 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 (51)
The stock market would fail if everyone just bought index funds. But this can't happen because as the percentage of people holding index funds approaches 100%, there would be high profit to finding undervalued stocks.
The main thing that bothers me about the Boglehead program is the usual Goodhart's law deal: the more popular index funds become as a form of low-risk exposure to markets, the worse I'd expect them to perform as indices, and the less stable I'd expect them to be. I'm not sure what to actually do about this, though, or if it's even a problem worth worrying about.
I agree, and I think we can already observe the consequences: For example, since exchange traded funds have become more popular, their number increased from 276 to 3.906, and not all of them are passively managed any more. I don't know about the situation in the US, but in Germany, one of the largest direct banks incentivizes buying ETFs that are indexing risky underlying things (for example, one ETF follows the development of pension-funds in emerging markets). It does so by having lower trading costs for incentivized funds.
I think on a private level, one can still find index funds that are actually useful. On a global level, there are some worries that ETFs might contribute to a potential future crisis.
That's a nice oxymoron right there :-)