Index Funds Debate
The cluster discusses the pros and cons of index funds, including their market impact, comparisons to ETFs and active investing, concerns about price inflation and capital allocation, and overall viability for investors.
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Non-paywalled:https://web.archive.org/web/20221205200442/https://www.nytim...
My guess is that it has to do with index funds.
Can someone explain why index funds are not an option?
Why an ETF instead of an index fund?
Yes but optimally there would be at least some proliferation in index funds, and they would index differently.There are 2 top funds that invest in the same 500 companies. Many in the US who earns well is sending x% of their income to these funds without forethought. It's far too much mindless capital concentration.Even without the index funds, the S&P 500 is used as a base reference in many investment contexts.When everyone blindly accepts a truth in investing, it's worth
An index fund won't suddenly invest in unicorns or whatever else on a whim. They follow a particular plan (e.g. track a sector, track the S&P, whatever).
Index funds mean we all own a lot of amzn.
Buying the index just inflates the prices of all large companies held in the index without any due diligence into which ones have future potential. Not only are you failing to allocate your own capital into the economy productively, but you are counter-acting the investments of those who have made diligent investment decisions (while also providing them with alpha and a means to profit from your inefficiency).
Oh man - just read Matt Levine's stuff: https://www.bloomberg.com/view/articles/2015-07-22/index-fun...Good question - this is an on-going topic in the market actually. The correct answer, like a lot of financial economic theory goes, is that no one actually really knows.
Index funds don't try to time the market. Which ETFs are you thinking about? Hedge funds?