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If Michael Dell "parked" his money in stocks over the last 5 years, the prices would have been altered. Boards might have made different decisions, and his liq

If Michael Dell "parked" his money in stocks over the last 5 years, the prices would have been altered. Boards might have made different decisions, and his liquidity might have been compromised. There's no way to guarantee that it would have been a better result. edit: Also my long standing challenge, point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing.

Cyph0n 8y ago
I honestly don’t understand why people think they can apply conventional investment approaches to such vast amounts of money.
- widdershins 8y ago
  Care to prove them wrong? Or at least make an argument?
- wbl 8y ago
  Because they can? Nevada's pension fund is run by one guy who parks it all in Vanguard.
  - user5994461 8y ago
    The whole point of a pension fund is that you can only add money and never take it back. It doesn't work out if many people try to cash out.
    - parsnips 8y ago
      Nevada PERS is one of the worst examples as well, missing it's investment targets over pretty much any period of time you can define.
      - wbl 8y ago
        Because its targets were quite high. CalPERS much higher fees missed its similar assumptions.
    - walshemj 8y ago
      Pensions do pay out you know when people retire
  - walshemj 8y ago
    Well at least he's not putting it all on black :-) Pensions funds should not blindly put 100% in equity. Btw I have had a briefing from a trustee of one of the really big UK pension funds and they in no way invest like that. Given the briefing was under "Chattem House Rules" I cant say who and which major firm got sacked :-)
    - wbl 8y ago
      They have index funds for bonds also.
- jules 8y ago
  $27 billion is not that much on a global scale, and it won't greatly alter prices if spread out.
- conistonwater 8y ago
  $26 billion is not such a vast amount on the scale of the economy or the stock market, especially on the timescale of years. It is only vast relative to the amounts of money people are familiar with in everyday life. Financial markets are rather more robust than some people think, and can handle moving money around. Do you have a more specific argument in mind, or is it based purely on the vastness of the sums involved?
  - Cyph0n 8y ago
    That’s the GDP of a smaller, developing nation. There are many hedge funds that manage less than that. Amazon’s whole HQ2 competition took the US by storm and indirectly led to tons of speculative real estate investment all over the country, yet it involved much less than $26 billion... Yes, such a sum will likely not have a noticeable effect on the US stock market as a whole, but that doesn’t mean it’s a sum that can be invested as easily as many seem to assume.
    - conistonwater 8y ago
      It's usually wrong to compare fixed amounts of money (units of $) with GDP (units of $/year), "stocks vs flows". As far as I know, Amazon's HQ2 was much more to do with public relations and lobbying than anything to do with money, and I believe "took the US by storm" is a great exaggeration of the actual events, so I don't find what you're saying convincing. As others have pointed out, pension funds noticeably don't have a problem investing large amounts of money despite being in a similar situation. All the aspects you seem to be worried about are routinely handled in the financial markets.
      - Cyph0n 8y ago
        I understand the difference. I was just using GDP to demonstrate that the amount of money we’re talking about could run a country’s entire economy for a year. The competition for HQ2 was fierce across the US. States and cities were bending over backwards to meet Amazon’s demands. Any whiff of activity or rumor was covered by both national and regional news. Real estate investors were buying up land in virtually every state. All of this for a potential economic benefit much lower than this $26 billion we’ve been talking about. It was a nationwide frenzy. Again, the point is that investing $26 billion can have an effect depending on how it is invested, not that it will definitely have an effect.
- SatvikBeri 8y ago
  Why not? The stock markets are large enough that you could easily invest billions of dollars and get average results. The main reason to do something else is if you can get above-average results (which can include considerations like lower drawdowns, less exposure to a single currency, etc.)
harryh 8y ago
The US Stock Market is worth about 35 trillion dollars. I don't think a .042% investment would be expected to make a significant difference in its performance over the last 5-6 years.
- parsnips 8y ago
  You've clearly never seen a trade book. edit: With 100% less snark the trillions in the stock market is illiquid, while $15 Billion over a short period of time (as to benefit of the 5 years of growth) is not a trivial thing to accomplish without changing prices when those trades hit the books.
  - throwawaymath 8y ago
    You could do with a lot less condescension to be frank. I don't really understand your claim with respect to liquidity, either. Be precise. Are you talking about slippage? Do you really think someone parking billions of dollars in the market would do so without staggering it to avoid prices moving against them? It's not like he's just going to throw $15 billion into the SPX and hope the daily volume adjusts without a problem.
  - jonknee 8y ago
    Michael Dell's fortune wouldn't change the market dynamics one bit. Apple's last buyback program was $100b, many times what Dell had and this is exclusively to purchase shares of one company in the S&P 500.
  - objektif 8y ago
    You clearly never vwapped.
  - harryh 8y ago
    Hundreds of billions of dollars are traded per day on the various US stock exchanges. 15 billion remains not a lot in the grand scheme of things.
  - gammateam 8y ago
    Just chiming in to reaffirm that you are correct. Further adding value by mentioning there is an art to trading an illiquid position Michael Dell would have needed to make special considerations than just hitting the sell button to get prices remotely close to the last things printed on screen.
SatvikBeri 8y ago
It's hard to get exact figures, but about half of Gates' net worth is estimated to have come from investing – though admittedly his money manager, Michael Larson, likely uses a very active, hands on style.
RestlessMind 8y ago
> his liquidity might have been compromised Index funds are one of the best liquid investments esp. compared to other high return ones like Real Estate of Venture Capital. > edit: Also my long standing challenge, point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing. I am not really sure what your point is. Can you please clarify? As far as I know, no one suggests index funds as a path to making billions. If you want to be a billionaire, either be born as one or go all in on a single crazy bet and hope it grows tremendously.
nabla9 8y ago
$21 billion represents 0.1% of the SP500 market cap. Sums that small don't significantly affect board decisions especially if they come from passive investors. For comparison, Vanguards SP500 fund (VOO) has market value $400B. Had Dell gradually bought SP500 index over a year, the effect on price would have been minimal.
- Cyph0n 8y ago
  > Had Dell gradually bought SP500 index over a year, the effect on price would have been minimal. But this is the whole point: you need to be careful when investing this kind of sum, because you may end up negatively impacting the market. It's all about scale.
- jjeaff 8y ago
  VOO is only about $90B. But if you add up all the variations of vanguard sp500 index funds, it seems to be well over $500B.
peisistratos 8y ago
> point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing. Are you joking? Look at the Forbes 400 richest. Look at the Fed's Survey of Consumer Finances. The person with power in San Francisco is not the 24 year old MIT Grad FAANG SWE who can barely afford his mortgage, but the LP for the VC who has founders coming to try to get that series A. Or the activist investors making Apple give a dividend. Billionaire heirs are "winning so hard" all over the place in index funds. S&P 500 2008-2018 return is 167% on low inflation. Even factoring in inflation it's over 100% - billions more than doubled in a decade. 2008 was an off year, but even factoring around that is still a huge win. Doing nothing for a decade, and more than doubling a few billion after inflation? Yes that is winning so hard. The biggest beneficiaries are the heirs who expropriate labor time from those who work, not those working and creating wealth.
- zozbot123 8y ago
  As others have mentioned already, 2008-2018 was a historic bull run and not at all representative. Anyone buying in 2008 or even sometime later was effectively making a very risky bet that the then-current recession would be over quickly and that growth would pick up again. The conventional wisdom at the time was rather different, as I'm sure you're quite aware of.
  - kurthr 8y ago
    Yes, but it's the same time period of Dell's growth so it's most relevant. His investment return would also be far more surprising over most other 10 year periods. As it is... he just matched the broad market so risk (and effort) adjusted it's actually not good at all.
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- skookumchuck 8y ago
marcosdumay 8y ago
The point is not that people are becoming rich by investing in index funds, but that rich people mostly do no better than people investing on those funds. Rich people are not special as a population, except for having a lot of money. Except that this is a much more complex affirmation than it appears. I do think people making this point are deluded, ignoring the complexity of the situation. What, of course, does not mean that they are wrong, only that the affirmation doesn't add any new information,
deleted 8y ago
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saosebastiao 8y ago
The average daily volume of SPY is ~$15B. If Dell increased that by 1% so as to minimally affect the markets, he could cycle in and out of $27B over the course of a year. Diversified over several index funds, or even creating his own, he could do it much faster. That seems a lot more liquid than his current situation. I agree though, nobody gets massively rich on passive investment. You get massively rich on active schemes (whether that is via entrepreneurship or investing), and then you passively collect when the scale of your wealth grows to the point where the liquidity of passive schemes is more important.
- skookumchuck 8y ago
  > nobody gets massively rich on passive investment If they'd invested, say, $5m in AMZN when it opened, they'd be a billionaire today.
  - haneefmubarak 8y ago
    That's active investment, in that you have to actively select Amazon and not one for the hundred other companies that listed and went nowhere.
    - skookumchuck 8y ago
      > That's active investment Nope. Buying something doesn't make it "active". Active means you are involved in managing the business. My example was buying AMZN and literally doing NOTHING with it for 20 years. It's the very definition of passive investing.
      - haneefmubarak 8y ago
        I'm sorry, but I believe you're quite mistaken with the definitions, at least as they are conventionally used (from Bloomberg [1]): > Active investing is what used to just be called investing — buying or selling individual stocks or bonds. >... > Passive investments track indexes, which are groups of securities that are alike in some way. [1]: https://www.bloomberg.com/quicktake/active-vs-passive-investing https://www.bloomberg.com/quicktake/active-vs-passive-invest...
throwawaymath 8y ago
> If Michael Dell "parked" his money in stocks over the last 5 years, the prices would have been altered. No they wouldn't have been, at least not materially. Michael Dell's entire fortune is about $30 billion. That's literally a rounding error on Vanguard's entire assets under management, which is over $5 trillion. That's just Vanguard - Fidelity and Blackrock each have over $6 trillion as well. I think you're vastly underestimating the amount of liquidity available in the market if you think any single billionaire could materially move the prices of a major, diversified fund. > Also my long standing challenge, point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing. Do you mean someone who became a billionaire by taking a relatively small net worth and parking it in index funds? Or do you mean a billionaire who maintains and grows their fortune by parking it index funds? The former is ludicrous to the point of being a strawman, and I don't understand what it proves by being true. The latter is trivially true and demonstrates that billionaires do choose to passively grow their fortunes.
- parsnips 8y ago
  >The former is ludicrous to the point of being a strawman, and I don't understand what it proves by being true. The latter is trivially true and demonstrates that billionaires do choose to passively grow their fortunes. The point is that it's a direct refutation of the real strawman argument: that Michael Dell, self-made billionaire, is an idiot because he could have _possibly_ made more money at some point by engaging in a different economic activity. He didn't become a billionaire by passive investing, he became a billionaire by actively building businesses, which he continues to do. WRT to liquidity let's say that Dell wanted to invest $15B over 2013 in the stock market. That's $70MM every single trading day of the year. The SEC, thinks that $20MM in a calendar day is a large investor that could affect markets, and require 13H form registration. So it's clear the SEC at least doesn't agree with the premise that a single billionaire cannot affect the market.
  - throwawaymath 8y ago
    I think you might be interpreting the original claim too harshly. Yes, literally parking $15 billion in the SPX wouldn't have worked (or at least, he couldn't have done so immediately without altering prices). But attacking that example doesn't diminish the spirit of the claim. If we step back from the SPX and talk about investing in a diversified portfolio of equities in general, it's fully possible to quickly invest $15 billion without meaningfully altering the price. The reality of the past decade's bull market is that Michael Dell could have invested $15 billion into the market and turned it into $26 billion. Of course, that's just the positive claim; it remains a normative as to whether or not he should do anything. But from a purely numerical perspective: yes, he could have invested in diversified stocks and gotten a comparable return. Responding to your edit: > So it's clear the SEC at least doesn't agree with the premise that a single billionaire cannot affect the market. Rule 13h-1 isn't a useful heuristic here, for two reasons: 1. It was philosophically inspired by, and designed to track trading activity of, HFT firms. In particular, the idea is to keep a closer eye on very fast trading activity which could suddenly correlate in the same direction. If the aggregate activity of many amateur investors begins to correlate it's not necessarily a problem; it is a problem if many traders over a certain threshold begin to correlate strongly. Notably, this is why the rule includes a "circuit breaker" clause for halting trading. 2. The rule specifically excludes ETFs exchanging hands. In other words, this rule wouldn't apply to someone who approached a very large firm with billions of dollars to pour into a collection of ETFs.
empath75 8y ago
You’re not going to become a billionaire by investing in index fund but it’s a lot safer than active investing. On average, you’ll do better in index funds but there’s a lot more variance in active investing. I’m up 400% over the past 4 years or so active investing (although at one point I had lost 50% of my initial stake). A coworker of mine lost 90% of his money this year. You’re not going to see either of those outcomes with index investing.
jonknee 8y ago
> Also my long standing challenge, point out the index fund billionaire OPs point was Dell experienced an average return and could have done this without all the work he did to take Dell private and then public again. The key is he was already one of the richest people in the world (from incredible percentage gains in the early days of Dell), once you're up there you can indeed passively invest and have huge returns for no work. The trick is all about getting the initial fortune.
lyime 8y ago
That’s you assuming he did it for the money.

Cyph0n 8y ago

I honestly don’t understand why people think they can apply conventional investment approaches to such vast amounts of money.

widdershins 8y ago
Care to prove them wrong? Or at least make an argument?
wbl 8y ago
Because they can? Nevada's pension fund is run by one guy who parks it all in Vanguard.
- user5994461 8y ago
  The whole point of a pension fund is that you can only add money and never take it back. It doesn't work out if many people try to cash out.
  - parsnips 8y ago
    Nevada PERS is one of the worst examples as well, missing it's investment targets over pretty much any period of time you can define.
    - wbl 8y ago
      Because its targets were quite high. CalPERS much higher fees missed its similar assumptions.
  - walshemj 8y ago
    Pensions do pay out you know when people retire
- walshemj 8y ago
  Well at least he's not putting it all on black :-) Pensions funds should not blindly put 100% in equity. Btw I have had a briefing from a trustee of one of the really big UK pension funds and they in no way invest like that. Given the briefing was under "Chattem House Rules" I cant say who and which major firm got sacked :-)
  - wbl 8y ago
    They have index funds for bonds also.
jules 8y ago
$27 billion is not that much on a global scale, and it won't greatly alter prices if spread out.
conistonwater 8y ago
$26 billion is not such a vast amount on the scale of the economy or the stock market, especially on the timescale of years. It is only vast relative to the amounts of money people are familiar with in everyday life. Financial markets are rather more robust than some people think, and can handle moving money around. Do you have a more specific argument in mind, or is it based purely on the vastness of the sums involved?
- Cyph0n 8y ago
  That’s the GDP of a smaller, developing nation. There are many hedge funds that manage less than that. Amazon’s whole HQ2 competition took the US by storm and indirectly led to tons of speculative real estate investment all over the country, yet it involved much less than $26 billion... Yes, such a sum will likely not have a noticeable effect on the US stock market as a whole, but that doesn’t mean it’s a sum that can be invested as easily as many seem to assume.
  - conistonwater 8y ago
    It's usually wrong to compare fixed amounts of money (units of $) with GDP (units of $/year), "stocks vs flows". As far as I know, Amazon's HQ2 was much more to do with public relations and lobbying than anything to do with money, and I believe "took the US by storm" is a great exaggeration of the actual events, so I don't find what you're saying convincing. As others have pointed out, pension funds noticeably don't have a problem investing large amounts of money despite being in a similar situation. All the aspects you seem to be worried about are routinely handled in the financial markets.
    - Cyph0n 8y ago
      I understand the difference. I was just using GDP to demonstrate that the amount of money we’re talking about could run a country’s entire economy for a year. The competition for HQ2 was fierce across the US. States and cities were bending over backwards to meet Amazon’s demands. Any whiff of activity or rumor was covered by both national and regional news. Real estate investors were buying up land in virtually every state. All of this for a potential economic benefit much lower than this $26 billion we’ve been talking about. It was a nationwide frenzy. Again, the point is that investing $26 billion can have an effect depending on how it is invested, not that it will definitely have an effect.
SatvikBeri 8y ago
Why not? The stock markets are large enough that you could easily invest billions of dollars and get average results. The main reason to do something else is if you can get above-average results (which can include considerations like lower drawdowns, less exposure to a single currency, etc.)

harryh 8y ago

The US Stock Market is worth about 35 trillion dollars. I don't think a .042% investment would be expected to make a significant difference in its performance over the last 5-6 years.

parsnips 8y ago
You've clearly never seen a trade book. edit: With 100% less snark the trillions in the stock market is illiquid, while $15 Billion over a short period of time (as to benefit of the 5 years of growth) is not a trivial thing to accomplish without changing prices when those trades hit the books.
- throwawaymath 8y ago
  You could do with a lot less condescension to be frank. I don't really understand your claim with respect to liquidity, either. Be precise. Are you talking about slippage? Do you really think someone parking billions of dollars in the market would do so without staggering it to avoid prices moving against them? It's not like he's just going to throw $15 billion into the SPX and hope the daily volume adjusts without a problem.
- jonknee 8y ago
  Michael Dell's fortune wouldn't change the market dynamics one bit. Apple's last buyback program was $100b, many times what Dell had and this is exclusively to purchase shares of one company in the S&P 500.
- objektif 8y ago
  You clearly never vwapped.
- harryh 8y ago
  Hundreds of billions of dollars are traded per day on the various US stock exchanges. 15 billion remains not a lot in the grand scheme of things.
- gammateam 8y ago
  Just chiming in to reaffirm that you are correct. Further adding value by mentioning there is an art to trading an illiquid position Michael Dell would have needed to make special considerations than just hitting the sell button to get prices remotely close to the last things printed on screen.

SatvikBeri 8y ago

It's hard to get exact figures, but about half of Gates' net worth is estimated to have come from investing – though admittedly his money manager, Michael Larson, likely uses a very active, hands on style.

RestlessMind 8y ago

> his liquidity might have been compromised Index funds are one of the best liquid investments esp. compared to other high return ones like Real Estate of Venture Capital. > edit: Also my long standing challenge, point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing. I am not really sure what your point is. Can you please clarify? As far as I know, no one suggests index funds as a path to making billions. If you want to be a billionaire, either be born as one or go all in on a single crazy bet and hope it grows tremendously.

nabla9 8y ago

$21 billion represents 0.1% of the SP500 market cap. Sums that small don't significantly affect board decisions especially if they come from passive investors. For comparison, Vanguards SP500 fund (VOO) has market value $400B. Had Dell gradually bought SP500 index over a year, the effect on price would have been minimal.

Cyph0n 8y ago
> Had Dell gradually bought SP500 index over a year, the effect on price would have been minimal. But this is the whole point: you need to be careful when investing this kind of sum, because you may end up negatively impacting the market. It's all about scale.
jjeaff 8y ago
VOO is only about $90B. But if you add up all the variations of vanguard sp500 index funds, it seems to be well over $500B.

peisistratos 8y ago

> point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing. Are you joking? Look at the Forbes 400 richest. Look at the Fed's Survey of Consumer Finances. The person with power in San Francisco is not the 24 year old MIT Grad FAANG SWE who can barely afford his mortgage, but the LP for the VC who has founders coming to try to get that series A. Or the activist investors making Apple give a dividend. Billionaire heirs are "winning so hard" all over the place in index funds. S&P 500 2008-2018 return is 167% on low inflation. Even factoring in inflation it's over 100% - billions more than doubled in a decade. 2008 was an off year, but even factoring around that is still a huge win. Doing nothing for a decade, and more than doubling a few billion after inflation? Yes that is winning so hard. The biggest beneficiaries are the heirs who expropriate labor time from those who work, not those working and creating wealth.

zozbot123 8y ago
As others have mentioned already, 2008-2018 was a historic bull run and not at all representative. Anyone buying in 2008 or even sometime later was effectively making a very risky bet that the then-current recession would be over quickly and that growth would pick up again. The conventional wisdom at the time was rather different, as I'm sure you're quite aware of.
- kurthr 8y ago
  Yes, but it's the same time period of Dell's growth so it's most relevant. His investment return would also be far more surprising over most other 10 year periods. As it is... he just matched the broad market so risk (and effort) adjusted it's actually not good at all.
  - deleted 8y ago
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skookumchuck 8y ago

marcosdumay 8y ago

The point is not that people are becoming rich by investing in index funds, but that rich people mostly do no better than people investing on those funds. Rich people are not special as a population, except for having a lot of money. Except that this is a much more complex affirmation than it appears. I do think people making this point are deluded, ignoring the complexity of the situation. What, of course, does not mean that they are wrong, only that the affirmation doesn't add any new information,

deleted 8y ago

[deleted]

saosebastiao 8y ago

The average daily volume of SPY is ~$15B. If Dell increased that by 1% so as to minimally affect the markets, he could cycle in and out of $27B over the course of a year. Diversified over several index funds, or even creating his own, he could do it much faster. That seems a lot more liquid than his current situation. I agree though, nobody gets massively rich on passive investment. You get massively rich on active schemes (whether that is via entrepreneurship or investing), and then you passively collect when the scale of your wealth grows to the point where the liquidity of passive schemes is more important.

skookumchuck 8y ago
> nobody gets massively rich on passive investment If they'd invested, say, $5m in AMZN when it opened, they'd be a billionaire today.
- haneefmubarak 8y ago
  That's active investment, in that you have to actively select Amazon and not one for the hundred other companies that listed and went nowhere.
  - skookumchuck 8y ago
    > That's active investment Nope. Buying something doesn't make it "active". Active means you are involved in managing the business. My example was buying AMZN and literally doing NOTHING with it for 20 years. It's the very definition of passive investing.
    - haneefmubarak 8y ago
      I'm sorry, but I believe you're quite mistaken with the definitions, at least as they are conventionally used (from Bloomberg [1]): > Active investing is what used to just be called investing — buying or selling individual stocks or bonds. >... > Passive investments track indexes, which are groups of securities that are alike in some way. [1]: https://www.bloomberg.com/quicktake/active-vs-passive-investing https://www.bloomberg.com/quicktake/active-vs-passive-invest...

throwawaymath 8y ago

> If Michael Dell "parked" his money in stocks over the last 5 years, the prices would have been altered. No they wouldn't have been, at least not materially. Michael Dell's entire fortune is about $30 billion. That's literally a rounding error on Vanguard's entire assets under management, which is over $5 trillion. That's just Vanguard - Fidelity and Blackrock each have over $6 trillion as well. I think you're vastly underestimating the amount of liquidity available in the market if you think any single billionaire could materially move the prices of a major, diversified fund. > Also my long standing challenge, point out the index fund billionaire. We all want to meet that person who's winning so hard, by doing nothing. Do you mean someone who became a billionaire by taking a relatively small net worth and parking it in index funds? Or do you mean a billionaire who maintains and grows their fortune by parking it index funds? The former is ludicrous to the point of being a strawman, and I don't understand what it proves by being true. The latter is trivially true and demonstrates that billionaires do choose to passively grow their fortunes.

parsnips 8y ago
>The former is ludicrous to the point of being a strawman, and I don't understand what it proves by being true. The latter is trivially true and demonstrates that billionaires do choose to passively grow their fortunes. The point is that it's a direct refutation of the real strawman argument: that Michael Dell, self-made billionaire, is an idiot because he could have _possibly_ made more money at some point by engaging in a different economic activity. He didn't become a billionaire by passive investing, he became a billionaire by actively building businesses, which he continues to do. WRT to liquidity let's say that Dell wanted to invest $15B over 2013 in the stock market. That's $70MM every single trading day of the year. The SEC, thinks that $20MM in a calendar day is a large investor that could affect markets, and require 13H form registration. So it's clear the SEC at least doesn't agree with the premise that a single billionaire cannot affect the market.
- throwawaymath 8y ago
  I think you might be interpreting the original claim too harshly. Yes, literally parking $15 billion in the SPX wouldn't have worked (or at least, he couldn't have done so immediately without altering prices). But attacking that example doesn't diminish the spirit of the claim. If we step back from the SPX and talk about investing in a diversified portfolio of equities in general, it's fully possible to quickly invest $15 billion without meaningfully altering the price. The reality of the past decade's bull market is that Michael Dell could have invested $15 billion into the market and turned it into $26 billion. Of course, that's just the positive claim; it remains a normative as to whether or not he should do anything. But from a purely numerical perspective: yes, he could have invested in diversified stocks and gotten a comparable return. Responding to your edit: > So it's clear the SEC at least doesn't agree with the premise that a single billionaire cannot affect the market. Rule 13h-1 isn't a useful heuristic here, for two reasons: 1. It was philosophically inspired by, and designed to track trading activity of, HFT firms. In particular, the idea is to keep a closer eye on very fast trading activity which could suddenly correlate in the same direction. If the aggregate activity of many amateur investors begins to correlate it's not necessarily a problem; it is a problem if many traders over a certain threshold begin to correlate strongly. Notably, this is why the rule includes a "circuit breaker" clause for halting trading. 2. The rule specifically excludes ETFs exchanging hands. In other words, this rule wouldn't apply to someone who approached a very large firm with billions of dollars to pour into a collection of ETFs.

empath75 8y ago

You’re not going to become a billionaire by investing in index fund but it’s a lot safer than active investing. On average, you’ll do better in index funds but there’s a lot more variance in active investing. I’m up 400% over the past 4 years or so active investing (although at one point I had lost 50% of my initial stake). A coworker of mine lost 90% of his money this year. You’re not going to see either of those outcomes with index investing.

jonknee 8y ago

> Also my long standing challenge, point out the index fund billionaire OPs point was Dell experienced an average return and could have done this without all the work he did to take Dell private and then public again. The key is he was already one of the richest people in the world (from incredible percentage gains in the early days of Dell), once you're up there you can indeed passively invest and have huge returns for no work. The trick is all about getting the initial fortune.

lyime 8y ago

That’s you assuming he did it for the money.