Why Index Funds Are Like Subprime CDOs

Re:Why Index Funds Are Like Subprime CDOs by Retric on Wednesday September 04, 2019 @07:31PM (#20882428)

Index funds can and generally should skip Berkshire Hathaway class A and just buy class B stocks without issue. It’s meaningless in this context.

The SP500 has a long tail 150M on a 20B dollar company, which is the median, is 0.75% per day that’s quite a bit of motion normally but you expect volatility to go up on a major sell off.

Anyway, if 1% of all money is removed from index funds on the same day whatever caused that is also going to cause the market is going to crash and crash hard. It would take something like an outbreak of Ebola in NYC to get that kind of a reaction.

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Re:Why Index Funds Are Like Subprime CDOs by mcguire on Wednesday September 04, 2019 @09:07PM (#20882980)

If 1% of the money in index funds exited the market in any form (not just index fund withdrawals), it's going to be a bad day any way you look at it.

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Re:Why Index Funds Are Like Subprime CDOs by segmondy on Wednesday September 04, 2019 @11:11PM (#20883557)

I think the fund managers know this and will collude to prevent it from happening. They are smart enough to know about game theory, it's not their money. So they can sit and not go on a selling frenzy.

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Re:Why Index Funds Are Like Subprime CDOs by danw1979 on Friday September 06, 2019 @10:53AM (#20896166)

Are they manually managed though ? isn't there an algorithm somewhere responsible for balancing these funds ?

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