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Index funds are good. They are a way of saying "I don't know how best to allocate capital, i'll leave it to the professionals who do, and simply capture the mar

by darawk 8y ago

Index funds are good. They are a way of saying "I don't know how best to allocate capital, i'll leave it to the professionals who do, and simply capture the market return for myself". Ideally, most money will be managed by index funds, and a small pool of extremely efficient money managers (some mix of quant and discretionary) will manage a comparatively small pool of capital that actually determines the prices of everything. There is nothing bad about this. This is the way all economic activities become more efficient.

Barrin92 8y ago
That is essentially affirming the authors take on the story though, is it not? If it is really preferential for investors and society at large to follow the signal of professional managers, than in the future this might even be further consolidated by advances in tech, and the result will simply be a rationally managed system that allocates capital by planning or design, rather than through numerous 'amateur', active market participants who act on spontaneous price mechanisms. I also don't see anything intrinsically wrong with this, but funnily enough it does seem to imply that the title of the article is correct
- clairity 8y ago
  everyone seems to be reacting to the question in the title, rather than the point of the article, which is skeptical about perfecting the algorithmic trading robot (the mythical middle between a marketless communist ideal and market-dependent capitalist ideal). that is, capital allocation is (NP-)hard and a decentralized capital market might just be the most optimal (though imperfect) solution.
clairity 8y ago
yes, but i would just amend your prelude to "i'll leave it to professionals to allocate my capital efficiently...". some folks might know how to calculate an efficient portfolio, but may not want to manage such a thing (tracking dozens/hundreds of equities and adjusting periodically). interestingly, like other industries, there's a tension between available surplus and efficiency in finance. the less money siphoned off by active fund managers, the more efficient the market.
- kuhhk 8y ago
  > but may not want to manage such a thing This is exactly where my mind is at. I know how to diversify, allocate, and adjust an efficient portfolio, but I don't want to do it myself. Same reason why I use managed services in IT ... I know how to run a mail server, web server, frontend, backend, etc, but I still use managed services (gmail, dropbox, squarespace, etc) to do it for me, because I'm optimizing for my time.

by darawk 8y ago

Barrin92 8y ago

That is essentially affirming the authors take on the story though, is it not? If it is really preferential for investors and society at large to follow the signal of professional managers, than in the future this might even be further consolidated by advances in tech, and the result will simply be a rationally managed system that allocates capital by planning or design, rather than through numerous 'amateur', active market participants who act on spontaneous price mechanisms. I also don't see anything intrinsically wrong with this, but funnily enough it does seem to imply that the title of the article is correct

clairity 8y ago
everyone seems to be reacting to the question in the title, rather than the point of the article, which is skeptical about perfecting the algorithmic trading robot (the mythical middle between a marketless communist ideal and market-dependent capitalist ideal). that is, capital allocation is (NP-)hard and a decentralized capital market might just be the most optimal (though imperfect) solution.

clairity 8y ago

yes, but i would just amend your prelude to "i'll leave it to professionals to allocate my capital efficiently...". some folks might know how to calculate an efficient portfolio, but may not want to manage such a thing (tracking dozens/hundreds of equities and adjusting periodically). interestingly, like other industries, there's a tension between available surplus and efficiency in finance. the less money siphoned off by active fund managers, the more efficient the market.

kuhhk 8y ago
> but may not want to manage such a thing This is exactly where my mind is at. I know how to diversify, allocate, and adjust an efficient portfolio, but I don't want to do it myself. Same reason why I use managed services in IT ... I know how to run a mail server, web server, frontend, backend, etc, but I still use managed services (gmail, dropbox, squarespace, etc) to do it for me, because I'm optimizing for my time.