EDIT: assumably the downvotes are from people who are unaware of the situation. https://us.spindices.com/indices/equity/sp-500 FB is the 4th largest exposure.

Also, in contrast to what some commenters believe, you cannot short FB from your retirement fund. https://www.irs.gov/publications/p590b is the relevant part from the IRS rules

Read down the list, and it's "this company set back technology and grew by consistently backstabbing partners and customers alike... this company set back the country by taking billions of dollars and then didn't build the infrastructure the fees were for... these companies grew by secretly mass-spying on everyone in ways that were already illegal in other modalities... this company killed all those people through arguably criminal negligence, and walked away..."

(I'm a big proponent of passive index investing, and I don't mean to discourage it. Bogle-style US total-market or S&P 500, balanced with Barclay's US bond index. All the better that it's passive, so you're reminded less of how sausage is made, while you try to make sure you won't retire as a homeless street person.)

https://www.dividend.com/news/2017/11/03/companies-multiple-...

One most certainly can, as most recently I sold calls from my Fidelity rollover IRA. Now can I literally short stocks from my IRA? I just tried it, and I'm not given the option (whereas I am on another account). Maybe that's a feature I don't have turned on, or maybe I can't literally do that from an IRA. But if I can trade options contracts, I could effectively do the same as shorting.

https://www.irs.gov/publications/p590b

> Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.

> The following are some examples of prohibited transactions with a traditional IRA.

> - Using it as security for a loan.

If your IRA let you sell calls, you likely own the underlying equity.

Surprising how many people aren't familiar with the rules and just downvote

Ah, of course, borrowing the shares and all. Hadn't given it a lot of thought, frankly; short trading stays away from the IRA.

If your IRA let you sell calls, you likely own the underlying equity.

For sure, trying to get rid of the underlying stock that I didn't want anymore. I'd be shocked if one were allowed to use their IRA to trade, say, naked puts. But without looking to see if I've done it, I'll assume one can buy puts (with a trade for the underlying stock) because I buy calls all the time using the IRA.

I wouldn't want my passive investment vehicle to be actively influencing the companies I am investing in.

https://about.vanguard.com/investment-stewardship/how-our-fu...

Not clear to me how they decided how to vote.

https://about.vanguard.com/investment-stewardship/perspectiv...

Which makes sense to ME, but you can be sure your investment vehicle is actively directing everything you're investing in, towards whatever benefits the short-term value of whatever you think you're helping.

Possibly excepting certain arrogant companies like I dunno, Amazon, Uber: stuff that is essentially ungovernable, especially when you can't get controlling interest of the thing.

Since you are not actively investing in FB or any individual company, you can’t vote (since you passively invested in an index). Seems fair to me.

Yes, this is an issue that is largely debated, and there are some very interesting conflicts of interest - just curious why you specifically think it's so bad.

So how much money (and by extension votes) these index funds wield is not connected to the quality of their contribution to governance. It also seems to me like there isn't much accountability and visibility into how they are voting from the perspective of people deciding which index fund to invest in.

So you have people collecting massive amounts of clout, but no feedback loop ensuring that they lose that clout if they underperform at that particular task.

Also one of the talking points of passive investing is that the trained professionals aren't as qualified or smart as they think they are. Active management risk is something to be avoided. As some of these funds grow in size they wield significant power and introduce active management risk. You just don't see it because the fund still tracks the index.

I know that last bit is splitting hairs. Some active management always occurs otherwise how can companies function.

One question is why should a passive fund be treated differently from an active fund in terms of how they contribute to governance? One difference is some of these index funds are absolutely massive and wield more power then a typical active fund.

https://www.seattletimes.com/business/vanguard-founder-john-...

1) There are mutual funds that do stick to "value" stocks i.e. low P/E ratios, which would exclude companies like FB.

2) If you really want to, you could take a short position that cancels the exposure to FB in an S&P index fund. (I don't know how legal that is in a retirement fund, but I know you can buy ETFs that have short positions in them, so it should be legal in principle.)

3) People hold actively managed funds in their 401ks (though I don't advise it myself), and those funds may decide against such stocks as FB.

Fair point that large-cap index funds will have notable exposure though.

In any case, the point of a S&P500 fund is to get exposure to ALL companies, roughly in order of their size. Facebook is a big company, so any fund should have a chunk of it.

Without this feature something isn't really a stock, at least not in spirit. It's more like the shittiest of trash-tier junk bonds.

"Fixed return" isn't really relevant from a practical standpoint because shares and junk debt both have volatile prices, and price is what actually matters when it comes to securities like this.

It's absolutely relevant. Sometimes junior debt trades a little bit like equity but the point is that bonds mature whereas equity exists for the lifetime of a company.

>... price is what actually matters when it comes to securities like this.

Absolute return is what matters, not price. The return of a bond - junk or otherwise - is known on day one of a bond issuance in the absence of default. That makes fixed income a fundamentally different asset class to equity.

Even a junior perpetual junk bond is different to equity. The junk bond's coupons would be fixed, whereas dividends vary according to company profits.

For literally everyone else, it is, in fact, price that matters.

I made the distinction between price and total return above because an asset's price can remain more or less constant while still being a profitable investment: for example a utility company with a high dividend yield.

Let me try another tack. Would you rather own non-voting equity or junior debt in a company that is about to strike a deal that will make them wildly profitable?

[0] https://money.usnews.com/money/blogs/the-smarter-mutual-fund... (from 2014, but the number likely hasn't changed substantially)

I saw that with a family that owned a condemned property. They couldn't rent it but they sure could borrow against the land price (ever rising) minus the cost of demo'ing the old building.

I also think stocks tend to keep up with/beat inflation and thus are better than cash as a store of value.

So long as asset value inflates, it's good for cash via loans. The moreso if asset inflation > nominal interest rates.

If there is an 0.01% chance of paying $10,000 dividend, or 100% chance of paying $1 dividend, the expected payout is the same.