Re:Why Index Funds Are Like Subprime CDOs
by kd5bjo on Thursday September 05, 2019 @01:57AM
(#20884213)
There’s a lot more that goes into the success of a business than the financials that investment services firms have access to. It’s entirely possible for someone that interacts with a company on a daily or weekly basis to have a better idea of how well that business is doing than professional investors, especially if they also bother to look at the public financials.
Gathering this kind of information may be too labor-intensive to justify doing it as a profession but rewarding enough for an interested amateur.
Re:Why Index Funds Are Like Subprime CDOs
by repolfx on Friday September 06, 2019 @09:55AM
(#20895648)
That assumes it's possible to retain a deep understanding of a company or industry whilst being outside of and focusing full time on "money management". It's the same school of thought that says corporate management is a generic skill that people can/should be taught and then they can manage anything.
If anyone was able to do this, they'd be a successful money manager themselves. Yet few professionals actually manage to do this at all, let alone sufficiently to justify their fees, which is why index-fund investing is so popular in the first place.
The only real way to reduce the reliance on index funds is for professional investment services to become sufficiently competent that it makes sense to use their services. Asking the average person to "take one for the team" and throw their dart at the same dartboard the pros can't even hit isn't a great solution.
[EDIT: phrasing]