What will the eventual outcome of this shift to passive investing be? What is “too much”?
705 sats \ 2 replies \ @DudeJLebowski 13 Feb
Statistically, only around 50% of active managers beat their benchmark each year, stay with that same fund manager over 3 years, 5 years etc. and the probability that they beat the benchmark consistently falls and falls. When average passive fund charges are 0.1%-0.4% and active management around 0.8% - well over 1% for some funds and the world seems to finally be waking up to the fact that the majority of a portfolio should be in low cost passive funds.
Source - financial professional for 16 years.
reply
636 sats \ 0 replies \ @SimpleStacker 13 Feb
Individually, it's rational to go with a low cost index fund rather than a high cost manager or picking stocks yourself.
But I also think there's something fundamentally broken and self-referential when the majority of fund flows are determined by passive rules rather than research into a company's financial prospects.
Traditionally the thinking was that the price was determined by a thick market of traders doing their own research. The market price then reflects the marginal trader's opinion as to the value of the stock.
But what happens when the marginal trade price is determined by passive fund flows rather than financial analysis? Price may no longer reflect a trader's opinion of the financial value of the company but instead reflect some aggregation of the rules that govern the major passive funds.
Traders, then, in response to this, now need to base their stock valuations on an analysis of these passive rules rather than on financial analysis of the company. Thus increasing the self-referentiality of the markets.
I think this is what is scaring people. I'm not sure what to think, honestly. But I can see why some people think the dominance of passive funds means that "price discovery" is broken.
reply
1 sat \ 0 replies \ @_stacktoshi 13 Feb
Why a majority and not all? And isn't it a concern that the passive fund company gets voting rights in the companies they invest in and their investors don't?
reply
656 sats \ 0 replies \ @Bell_curve 12 Feb
Good question.
There are too many investors who believe index or passive funds are too conservative.
Too many investors think they can and should beat passive funds.
Is bitcoin hodling a passive investment?
I think so but that’s mostly good thing
reply
607 sats \ 0 replies \ @Bell_curve 12 Feb
For most people most of their equity is in their home or investment properties
reply
33 sats \ 0 replies \ @Bell_curve 12 Feb
Let’s pretend passive investment is 100 percent.
We can fire every active fund manager and their staff etc.
No one is trading futures, derivative and options?
No more day trading?
No more trading of individual stocks?
No more cnbc and Cramer lol
The world would definitely be different but I don’t see this happening
reply
10 sats \ 1 reply \ @nitter 12 Feb
Twitter2Nitter
Clearnet: nitter.cz | nitter.woodland.cafe | nitter.unixfox.eu | nitter.privacydev.net | nitter.perennialte.ch | nitter.soopy.moe | nitter.1d4.us | nitter.adminforge.de
Tor: nitter7bryz3..q553qd.onion | 26oq3gioiwcm..b4wwid.onion | vfaomgh4jxph..dauqad.onion | nitraeju2mip..evvuqd.onion | codeine3hsqn..brdqqd.onion
I2P: axd6uavsstsr..zf4q.b32.i2p | u6ikd6zndl3c..n2qa.b32.i2p | gseczlzmiv23..aoua.b32.i2p | tm4rwkeysv3z..4weq.b32.i2p | vernzdedoxuf..agva.b32.i2p
Lokinet: nitter.priv.loki/
Nitter is a free and open source alternative Twitter front-end focused on privacy and performance. Click here for more information.
reply
0 sats \ 0 replies \ @_stacktoshi 13 Feb
Sweet, nitter still works!
reply
10 sats \ 0 replies \ @OT 13 Feb
More people outsourcing financial responsibility
reply
1 sat \ 0 replies \ @DiracDelta 13 Feb
There was a guy on here just the other day looking for passive income and then being rather unfriendly toward the kind people sparing their time to inform him of his idiocy. $0.05m is nothing. Fiat is still overwhelmingly dominant.
reply
0 sats \ 0 replies \ @OriginalSize 13 Feb
More efficient but monocultural danger. Pick some stocks here and there to spice it up!
reply
0 sats \ 0 replies \ @grayruby 13 Feb
Underperformance for investors and price distortion are the outcomes. I think we are past the point of too much.
reply
0 sats \ 0 replies \ @SaToSHiWoMaN 13 Feb outlawed
stackers have outlawed this. turn on wild west mode in your /settings to see outlawed content.