Re:Why Index Funds Are Like Subprime CDOs
by dehrmann on Thursday September 05, 2019 @12:31AM
(#20883841)
A large cap index fund wouldn't have the same liquidity problems, but it has the problem that if this were to happen, funds might have to sell their large cap holdings to cover outflows, driving down those prices. At least it would reflect the NAV, though.
You could buy a closed-end mutual fund since it won't be balancing its holdings in the same way.
You could buy a small cap fund and short a large cap fund, betting that small cap shares will get distorted in the positive direction if there's a liquidity crunch.
I guess I'm somewhat less worried about people not picking stocks because hedge funds, and really, anyone greedy, will always try to do that, bringing some amount of pricing to the market.
You could buy a closed-end mutual fund since it won't be balancing its holdings in the same way.
You could buy a small cap fund and short a large cap fund, betting that small cap shares will get distorted in the positive direction if there's a liquidity crunch.
I guess I'm somewhat less worried about people not picking stocks because hedge funds, and really, anyone greedy, will always try to do that, bringing some amount of pricing to the market.