Re:A critique of the claim that passive investing is a bubble
by lovecg on Thursday September 05, 2019 @04:42PM
(#20890468)
The argument is that the automation at scale that ETFs bring to the table changes the game qualitatively. How many people would really buy and sell thousands of individual stocks in a correlated fashion if this infrastructure didn’t exist?
Re:A critique of the claim that passive investing is a bubble
by vkou on Thursday September 05, 2019 @05:51PM
(#20890963)
No, they'd have a dozen individual stocks that they would own, and when you combine fifty million people, each owning a dozen individual stocks, you'd get a pretty accurate proxy for the S&P 500.
They'd still follow the same herd mentality that they would, had they owned ETFs.
Re:A critique of the claim that passive investing is a bubble
by rocqua on Thursday September 05, 2019 @02:55PM
(#20889716)
Unless everyone has an evil twin, there is less chance of everyone wanting to exit X at the same time. Hence there won't be a run on X.
Moreover, if my evil twin a) owned a managed fund or b) sold in a slightly smarter way, then they would lose less on X due to liquidity.
Moreover, the hit on Xs price also has a slight hit on the ETF value. Hence there is a small positive feedback loop.
Re:A critique of the claim that passive investing is a bubble
by vkou on Thursday September 05, 2019 @03:29PM
(#20889974)
Everyone thinks they will be smart about their panic-selling when a market crash hits, but the reality is, most of them won't be... And the decision you should be making is not when to sell, but 'how much to buy'.
If you are panicked, and are selling your ETF, your evil twin is panicked, and selling all their stocks.
This causes the exact same downwards pressure on the market.
I don't buy an ETF because I want someone to do financial malarkey with my money. I buy it because I want to own stocks, and I can't be assed to deal with my own brokerage account. Besides the convenience aspect, there is zero difference between the two.