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Caught this story this morning on Bloomberg's Odd Lots podcast[1], it's a great story. The thread that stands out most to me (and to the hosts) is that here's

Caught this story this morning on Bloomberg's Odd Lots podcast[1], it's a great story. The thread that stands out most to me (and to the hosts) is that here's a person who looks at an 840-page government report, reads it in-depth, and creates an industry. That's a feel-good outcome, of hard work others aren't willing to do. In a coincidence, perhaps, Planet Money's latest episode[2] dealt with Warren Buffet's bet on an ETF over hedge funds. 1: http://www.bloomberg.com/news/articles/2016-03-07/odd-lots-how-an-obscure-government-report-launched-a-3-trillion-industry http://www.bloomberg.com/news/articles/2016-03-07/odd-lots-h... 2: http://www.npr.org/sections/money/2016/03/04/469247400/episode-688-brilliant-vs-boring http://www.npr.org/sections/money/2016/03/04/469247400/episo...

sparky_z 11y ago
To be clear, the Warren Buffet bet was about index funds. Not all ETFs track index funds, and even the ones that do aren't necessary. You can just buy into the funds directly.
- Amorymeltzer 11y ago
  Indeed, although Buffet did bet on an ETF, which was the index fund SPY.
- xyzzy4 11y ago
  You can make even more money in the long run if you use leverage to bet on the S&P 500. If you don't believe me, do the math out.
  - scottlocklin 11y ago
    I guess this is tautologically correct, but if you did a 2x levered punt on SPX in 2007, you'd have gone broke.
    - xyzzy4 11y ago
      That's not true if you sell stock to maintain a certain equity to debt ratio. If you use leverage in the S&P 500 then you have much a faster growth rate, so in the long term it's still better.
  - worik 11y ago
    Clearly you cannot do math. It all depends on market timing, and if you get that wrong you will go broke as quick as your leverage. If you can get that right, well you would not be posting here, you would own here....
  - jegutman 11y ago
    There's a funny story I read a while back about this play. If you did this for long enough eventually you'd be the biggest company in the S&P 500 (technically maybe not, but in practice very much so!).
- anonymousDan 11y ago
  Can you clarify the difference between an index fund and an etf? I always thought they were synonymous.
  - dne 11y ago
    ETF = investment fund traded on a stock exchange. Index fund = investment fund (mutual fund or ETF) that tracks an index, i.e. passively managed.
    - MagicWishMonkey 11y ago
      So is something like VSGAX an ETF or is it an index fund?
      - dne 11y ago
        It's an index mutual fund[1] that is also available as an ETF[2]. 1: https://personal.vanguard.com/us/funds/snapshot?FundId=5861&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=5861&... 2: https://personal.vanguard.com/us/funds/snapshot?FundId=0938&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=0938&...
      - elbows 11y ago
        If I understand correctly, ETF and index fund are orthogonal terms. An ETF is traded on the stock market -- in contrast to a mutual fund which you have to buy through other channels. An index fund tracks an index rather than being actively managed. I don't know about VSGAX specifically, but it could be both an ETF and an index fund.
      - tonfa 11y ago
        Index fund, it isn't trading in an exchange.
  - karmapolice 11y ago
    ETFs are just investment funds you can buy and sell in the stock market, with their own symbol and everything just like any other stocks. Index (passive) funds track an index, instead of trying to outperform the market. You can have passive funds that are not ETFs (do not appear as a symbol in the stock market, have to go through a bank or whatever to buy shares), and active funds that are ETFs (actively managed).
voguchv 11y ago
What backwards Kafka-esque horror show do you live in to believe a 800+ page government report of red tape and regulations is a feel-good outcome. Some people really do prefer slavery over liberty.
- Veratyr 11y ago
  Are you really arguing for deregulation of the financial industry in the name of 'liberty'? Lack of regulation leads to things like the global financial crisis.
  - eru 11y ago
    Read your sibling comments. voguchv is just trolling, and is not even complaining about regulation. He's complaining about a post mortem..
- Amorymeltzer 11y ago
  Putting aside the flamebait of your comment, you must not have read the story. The government report was following the massive crash in 1988 and was essentially an autopsy of what happened. One little section fantasized that perhaps a basket of funds might have helped avoid the events leading up to the crash. No regulations, no red-tape, just a postmortem accounting of the crash and a possible proscription.
- RockyMcNuts 11y ago
  Did you read TFA? Someone did an in-depth study of a market incident, noted a gap in the market, someone else filled the gap and made a successful product. They both presumably view it as a desirable outcome. Your aversion to it as a (hardly heavy-handed) government intervention is not really their problem. If the same guy had written a white paper and tweetstorm while employed as a VC or investment banker or economics professor it wouldn't exactly be the difference between liberty and slavery.
gcb0 11y ago
not really. he built index funds just like before. he was just the first one to afford enough lawyers to launch a product that would be shut down by regulators because of 800 page conflicting regulations

sparky_z 11y ago

To be clear, the Warren Buffet bet was about index funds. Not all ETFs track index funds, and even the ones that do aren't necessary. You can just buy into the funds directly.

Amorymeltzer 11y ago
Indeed, although Buffet did bet on an ETF, which was the index fund SPY.
xyzzy4 11y ago
You can make even more money in the long run if you use leverage to bet on the S&P 500. If you don't believe me, do the math out.
- scottlocklin 11y ago
  I guess this is tautologically correct, but if you did a 2x levered punt on SPX in 2007, you'd have gone broke.
  - xyzzy4 11y ago
    That's not true if you sell stock to maintain a certain equity to debt ratio. If you use leverage in the S&P 500 then you have much a faster growth rate, so in the long term it's still better.
- worik 11y ago
  Clearly you cannot do math. It all depends on market timing, and if you get that wrong you will go broke as quick as your leverage. If you can get that right, well you would not be posting here, you would own here....
- jegutman 11y ago
  There's a funny story I read a while back about this play. If you did this for long enough eventually you'd be the biggest company in the S&P 500 (technically maybe not, but in practice very much so!).
anonymousDan 11y ago
Can you clarify the difference between an index fund and an etf? I always thought they were synonymous.
- dne 11y ago
  ETF = investment fund traded on a stock exchange. Index fund = investment fund (mutual fund or ETF) that tracks an index, i.e. passively managed.
  - MagicWishMonkey 11y ago
    So is something like VSGAX an ETF or is it an index fund?
    - dne 11y ago
      It's an index mutual fund[1] that is also available as an ETF[2]. 1: https://personal.vanguard.com/us/funds/snapshot?FundId=5861&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=5861&... 2: https://personal.vanguard.com/us/funds/snapshot?FundId=0938&FundIntExt=INT https://personal.vanguard.com/us/funds/snapshot?FundId=0938&...
    - elbows 11y ago
      If I understand correctly, ETF and index fund are orthogonal terms. An ETF is traded on the stock market -- in contrast to a mutual fund which you have to buy through other channels. An index fund tracks an index rather than being actively managed. I don't know about VSGAX specifically, but it could be both an ETF and an index fund.
    - tonfa 11y ago
      Index fund, it isn't trading in an exchange.
- karmapolice 11y ago
  ETFs are just investment funds you can buy and sell in the stock market, with their own symbol and everything just like any other stocks. Index (passive) funds track an index, instead of trying to outperform the market. You can have passive funds that are not ETFs (do not appear as a symbol in the stock market, have to go through a bank or whatever to buy shares), and active funds that are ETFs (actively managed).

voguchv 11y ago

What backwards Kafka-esque horror show do you live in to believe a 800+ page government report of red tape and regulations is a feel-good outcome. Some people really do prefer slavery over liberty.

Veratyr 11y ago
Are you really arguing for deregulation of the financial industry in the name of 'liberty'? Lack of regulation leads to things like the global financial crisis.
- eru 11y ago
  Read your sibling comments. voguchv is just trolling, and is not even complaining about regulation. He's complaining about a post mortem..
Amorymeltzer 11y ago
Putting aside the flamebait of your comment, you must not have read the story. The government report was following the massive crash in 1988 and was essentially an autopsy of what happened. One little section fantasized that perhaps a basket of funds might have helped avoid the events leading up to the crash. No regulations, no red-tape, just a postmortem accounting of the crash and a possible proscription.
RockyMcNuts 11y ago
Did you read TFA? Someone did an in-depth study of a market incident, noted a gap in the market, someone else filled the gap and made a successful product. They both presumably view it as a desirable outcome. Your aversion to it as a (hardly heavy-handed) government intervention is not really their problem. If the same guy had written a white paper and tweetstorm while employed as a VC or investment banker or economics professor it wouldn't exactly be the difference between liberty and slavery.

gcb0 11y ago

not really. he built index funds just like before. he was just the first one to afford enough lawyers to launch a product that would be shut down by regulators because of 800 page conflicting regulations