“A Mild Recession”

Re:“A Mild Recession” by Jensson on Thursday July 14, 2022 @10:25AM (#32096450)

The passive vs active investor numbers I see tend to put them roughly equal or passive investors being more. Not sure exactly how index funds and passive investments are different, but since vanguard are selling index funds they probably define it as strictly as possible to make it look like it is a smaller part of the market.

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Re:“A Mild Recession” by SketchySeaBeast on Thursday July 14, 2022 @10:40AM (#32096636)

That may be the case, doing a bit of research here I see some numbers where if you slice only the America market passive investors are near parity of even a minor majority - but the question still remains, has that fundamentally changed the market composition?

I wonder if it'll make it more stable because the passive investors aren't as inclined to randomly shift money around or pull it out. Even if they are inclined to pull it out, does the behaviour of the money being pulled out look much different when looking at the market in aggregate? It stands to reason even active investors would be heavily invested in those exact same companies and would be deliberately pulling money out as well? It seems to me that all the investors investing in the average just means the market will continue to be average.

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Re:“A Mild Recession” by Rury on Thursday July 14, 2022 @02:00PM (#32099417)

If all investment activity was passive investment, there would be no pricing mechanism left in the market. If everyone just equally invested in everything, there'd be no discrepancy between stocks. Complete scam businesses would given value equally to businesses which actually do create value.

So, yes, passive investing helps stabilize the entire market to trade in tandem, but too much is a danger to the health & stability of our market and economy as it enables misallocation of capital.

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Re:“A Mild Recession” by SketchySeaBeast on Thursday July 14, 2022 @02:12PM (#32099552)

But that's not how the passive investing works - it's predicated off of curated indexes, so people are still making decisions. And there's not equal weighting in everything. What you're worried about isn't the current situation and it makes no sense that it ever would be.

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Re:“A Mild Recession” by Rury on Thursday July 14, 2022 @02:27PM (#32099736)

Unless weighting is done by business fundamentals, it still enables misallocation of capital. Many curated indexes and decisions are based on market cap, liquidity, public float, sector classification - all hardly fundamental.

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Re:“A Mild Recession” by SketchySeaBeast on Thursday July 14, 2022 @03:04PM (#32100181)

> Unless weighting is done by business fundamentals, it still enables misallocation of capital.

Is it your assertion that without index funds this would be occurring? We just saw deliberate decisions to buy companies like TSLA and GME that stronly argue against that.

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