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A comment on A critique of the claim that passive investing is a bubble. Parent comment

Re:A critique of the claim that passive investing is a bubble by Mathnerd314 on Thursday September 05, 2019 @01:33PM (#20888999)
There are some escape clauses in Vanguard's index funds:

The fund may temporarily depart from its normal investment policies and strategies when doing so is believed to be in the fund’s best interest. ... Vanguard funds can postpone payment of redemption proceeds for up to seven calendar days.

And a lot of index fund investors are buy-and-hold so it's unclear if a recession would even cause a liquidity / redemption crisis.

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Re:A critique of the claim that passive investing is a bubble by JumpCrisscross on Thursday September 05, 2019 @01:37PM (#20889046)
> And a lot of index fund investors are buy-and-hold

But index funds themselves aren't. They have to sell stock when units are destroyed and vice versa. In addition to other factors, this can result in weird tax effects as well as tracking error to the index.

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