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If everyone is just doing passive investment, there's no real price discovery, it's just valuable companies getting more valuable just because they're already v

If everyone is just doing passive investment, there's no real price discovery, it's just valuable companies getting more valuable just because they're already valuable. It also screws with management incentives for the companies when their 'owners' are completely checked out and uninterested in performance.

kspaans 9y ago
Vanguard is hardly a passive owner: https://about.vanguard.com/investment-stewardship/policies-and-guidelines/ https://about.vanguard.com/investment-stewardship/policies-a...
- fricat1ve 9y ago
  Essentially toothless because an index fund is going to invest the money either way.
  - kspaans 9y ago
    False! SNAP has been explicitly excluded from the S&P500 index for exactly this reason[0]. I'm not sure if "whole market" passive funds would include it or not. At the very least VTI has 0.03% of assets in SNAP[1]. Not much to worry about. 0 - https://uk.reuters.com/article/us-snap-s-p-idUKKBN1AH2RV https://uk.reuters.com/article/us-snap-s-p-idUKKBN1AH2RV 1 - https://www.etfchannel.com/symbol/snap/ https://www.etfchannel.com/symbol/snap/
    - MR4D 9y ago
      You’re confusing the maintainer of the index’s ( Standard & Poors) with the implementation (Vanguard). If S&P puts a company in, Vanguard will buy the shares. Not doing so could cause problems, including lawsuits.
      - kspaans 9y ago
        Yes, and as I said the S&P500 index excludes companies like Snapchat with the founder-has-most-votes trick. I suppose the real issue here is how much money goes into which indices, and which ones exclude companies like these.