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if you rebalance / repick, yes. If it's just buy and hold, I don't agree. The benefit of index funds is the failing companies are dropped before they hit $0.
by vibrato 10y ago
if you rebalance / repick, yes. If it's just buy and hold, I don't agree. The benefit of index funds is the failing companies are dropped before they hit $0.
- evanpw 10y agoThat seems like a strange perspective to me. All of the theoretical justification for passive investing (you get the average return without the fees, maximum diversification, etc.) implies that you'll get the best result from holding every possible security in some proportion. You're saying that index funds work not because of any of that, but because they've observed a market inefficiency (low market-cap or recently-fallen stocks underperform the market), and make an active decision to deviate from the market portfolio in order to exploit it. Why believe that there's exactly one easily-exploitable market inefficiency, but no others?
- deleted 10y ago[deleted]