Re:Why Index Funds Are Like Subprime CDOs
by bb88 on Wednesday September 04, 2019 @11:29PM
(#20883627)
> After all, when there's a market crash, did millions of machines in factories fall apart...
In 2008, the crash happened because suddenly Wyle E. Coyote realized there was gravity when he ran off the cliff. Mortgages were actually defaulting on a very high rate, but people put blindfolds on and didn't want to see. It wasn't just a "psychological overreaction" but real fear and panic as those same investors were trying to squeeze through the same exit door as everyone else.
There is still some reasonable fear in 2019 that large financial institutions will choose to make money at the expense of the economy.
Re:Why Index Funds Are Like Subprime CDOs
by lonelappde on Thursday September 05, 2019 @11:06AM
(#20887453)
If you were invested in the broader market, and didn't move your whole portfolio in our out of cash in 1 year,the 2008 worldwide economic collapse was barely a blip in long term performance.
Re:Why Index Funds Are Like Subprime CDOs
by bb88 on Saturday September 07, 2019 @01:57AM
(#20902073)
So you're point is exactly what again? It's okay for banks to manipulate the markets because in the end it all averages out?
Re:Why Index Funds Are Like Subprime CDOs
by danw1979 on Friday September 06, 2019 @10:43AM
(#20896058)
> It wasn't just a "psychological overreaction" but real fear and panic as those same investors were trying to squeeze through the same exit door as everyone else.
Panic is quite literally a psychological overreaction.
As to institutionalizing this stability, it would be nice if index funds offered fund choices that prohibited selling or trading for one, two, three decades. Since you as the investor would be adding information to the market ("I'm not an index fund band-wagoner, I understand buy-and-hold and I will practice what I preach") you would be rewarded with better returns in exchange for signaling your intentions and acting as a cushion when everyone else is panicking.