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And the other fun "is it a conspiracy theory or maybe actually true?" thing about Vanguard/Index investing is the idea that it might be undermining capitalism i
by harryh 8y ago
And the other fun "is it a conspiracy theory or maybe actually true?" thing about Vanguard/Index investing is the idea that it might be undermining capitalism itself because diversified owners aren't incentivized to compete.
https://www.bloomberg.com/opinion/articles/2017-10-26/maybe-index-funds-will-destroy-capitalism https://www.bloomberg.com/opinion/articles/2017-10-26/maybe-...
- walshemj 8y agoNo why would it its mirroring the way investment trusts /investment companies work in the UK and where set up in the 19th century to allow small investors to invest.
- harryh 8y agoI don't think UK investors in the 19th century were buying index funds where they owned a tiny piece of every company in the market. The current situation is quite a bit different.
- walshemj 8y agoIts more the principal that the investment company doesn't pay tax the owners do
- harryh 8y agoAh, I think you replied to my "destroying capitalism" comment when you meant to reply to my "tax scam" comment. Two different things. But anyways, the issue isn't about the company vs the owners paying the taxes because in this case the owners are the company. The issue is that these owners are (via the company) are (perhaps illegally) manipulating how their earnings are counted to lower their tax rate.
- walshemj 8y agoWell its what I do as a part owner of a uk investment trusts the company doesn't pay tax on gains but I pay tax on CGT and Dividend income. A lot of American industry rail roads in particular was funded by British investment trusts.
- OscarCunningham 8y agoMy thoughts on this is that index funds shouldn't vote in shareholder elections, for purely selfish reasons that mirror the reasons why they don't try to evaluate stock prices. The remaining voters are already voting in the company's best interest. Index funds don't have a comparative advantage at making voting decisions, so they shouldn't pay people to do it.
- zAy0LfpBZLC8mAC 8y agoBy that logic you also shouldn't vote in elections, because the remaining voters are already voting in the country's best interest.
- OscarCunningham 8y agoEveryone thinks they're right, even though only some of them can be. :-) If Vanguard had an option where I could control my share of shareholder votes then I might sometimes do that. I can imagine there being the occasional shareholder vote where I have different views or values than the rest of the shareholders, even after reflecting on the fact that they're thinking the same thing. But I don't see why I should expect Vanguard to be systematically better than other investors. The same way that I don't allow Vanguard to vote for me in political elections.
- sokoloff 8y agoVanguard (and other large fund companies) often uses ISS (Institutional Shareholder Services) for advice on how to vote their shares. ISS has some standing "policies" if you will about director and executive compensation and other matters that do matter to fund shareholders. Vanguard does not obligate themselves to follow ISS recommendations, but on the whole ISS advice/recommendations are/try to be pro-shareholder. Leaving voting only to active shareholders doesn't seem to improve shareholder representation, IMO. I'm happier to have Vanguard vote my shares than to abstain as abstaining provides an excess of power to the inside shareholders and company execs.
- zAy0LfpBZLC8mAC 8y ago
- twblalock 8y agoBogle himself had similar concerns: http://time.com/money/5468239/jack-bogle-index-funds-problem/ http://time.com/money/5468239/jack-bogle-index-funds-problem...