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A comment on Are Index Funds Communist?. Parent comment

Re:Are Index Funds Communist? by TylerE on Thursday January 17, 2019 @05:10PM (#18935145)
The problem is that the value of the components of the index is heavily tilted by peoples perception of the value of the index, and not the values of the components.
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Re:Are Index Funds Communist? by JumpCrisscross on Thursday January 17, 2019 @05:15PM (#18935182)
> the value of the components of the index is heavily tilted by peoples perception of the value of the index

“In the short run, the market is a voting machine but in the long run, it is a weighing machine” [1].

Dividends don’t care about peoples’ perceptions. Neither do interest payments and other cash-yielding payments. Active investing will always find a way to take advantage of stupid prices.

[1] https://www.goodreads.com/quotes/831517-in-the-short-run-the...

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Re:Are Index Funds Communist? by nradov on Thursday January 17, 2019 @05:15PM (#18935179)
Not at all. Arbitrageurs will always trade away such market inefficiencies. Ultimately valuations always converge to DCF, although it can take a while.
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Re:Are Index Funds Communist? by polskibus on Thursday January 17, 2019 @05:16PM (#18935185)
That's very interesting, can you point me to some reading material related to DCF convergence?
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