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What will be interesting to see is whether this actually stays good advice. Massive amounts of money (trillions) has been flowing into these passive ETFs and in
by charlesdm 9y ago
What will be interesting to see is whether this actually stays good advice. Massive amounts of money (trillions) has been flowing into these passive ETFs and index funds -- I would assume this creates some distortions in the financial system.
- throwaway0255 9y agoDefinitely interesting to think about. My current take is that even if the tiniest minority of activity exists outside of low-turnover ETFs, continued advancements in automated algorithmic trading (whether it's ML or regression or something that hasn't been invented yet) will get us closer to the perfectly efficient market and the only impact to low-turnover ETFs will be reduced volatility. Another possibility is that so much money gets parked in passive ETFs that the valuation of the indexed stocks becomes more tied to the influx of money than to the underlying enterprise value, then once the influx of money slows down the stocks revert to enterprise value and start to consistently depreciate, triggering a massive sell-off. If that happened it'd probably be bigger than the subprime mortgage crisis, right? What's your take?