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If you own an equity ETF in a retail brokerage, you actually own a claim on a claim on a claim on a fund that owns a claim on a claim on a claim on corporate st
by rphlx 10y ago
If you own an equity ETF in a retail brokerage, you actually own a claim on a claim on a claim on a fund that owns a claim on a claim on a claim on corporate stock which is itself a secondary or tertiary claim (behind debt and/or preferred stock) on tangible and intangible assets.
It is a common & legal practice for the fund to lend its claim on a claim on a claim on corporate stock to other parties, for a small amount of interest, to help reduce its fees. See https://personal.vanguard.com/pdf/ISGSL.pdf https://personal.vanguard.com/pdf/ISGSL.pdf
If the potential for fraud and error in this system doesn't give you a bit of a pause, it probably should.
- KKKKkkkk1 10y agoAnd yet it works so much better than stashing a bar of gold under your pillow.
- rphlx 10y agoWhy not both.. based on Chinese/Indian/Russian/German central bank action I do find the argument that gold is now a "worthless, obsolete shiny rock" unconvincing & I think a good case has been made for a modest allocation to physical PMs as insurance against tail risks. The goal is not to "outperform everything else" during normal market conditions but rather to limit worst-case draw down in the unlikely event of a major and sustained equity collapse, currency collapse, etc.