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Some indexes have filters that prevent really awful companies from being included. For example, I don't think Snapchat was allowed into the S&P 500 because the
by tfha 7y ago
Some indexes have filters that prevent really awful companies from being included. For example, I don't think Snapchat was allowed into the S&P 500 because the stock was so crappy.
- trimbo 7y agoVanguard's total stock market fund is Snapchat's #1 mutual fund holder https://finance.yahoo.com/quote/SNAP/holders/ https://finance.yahoo.com/quote/SNAP/holders/ AFAIK, most "target date" retirement funds use total market passive investing. Maybe instead of "index investing", I should have said "passive investing".
- brown9-2 7y agoWorth pointing out that the number in that table (which doesn't break things out by fund) for "Vanguard Group, The"'s holdings in SNAP seems to only be about 1% of the total of VTSMX https://investor.vanguard.com/mutual-funds/profile/VTSMX https://investor.vanguard.com/mutual-funds/profile/VTSMX
- trimbo 7y agoThe table below the fold breaks it out by fund
- conanbatt 7y agoGood lord. Vanguard has 5% of Snap! Vanguard must own a significant share in so many companies right now. I'm starting to believe the narrative that the next crisis is passive investing.
- jonknee 7y agoWell they also have a significant share of invested funds ($5.3 trillion under management!), it would be really weird if they didn't have a significant share of many companies.
- conanbatt 7y agoI guess the risk is that if people withdrew funds in a recession/crisis, they would blanket-kill every company out there, even companies doing really well.
- jonknee 7y agoAs opposed to all the recessions/crises before indexing where stocks didn't go down? Sharp people will scoop up great names at a discount just like always.
- conanbatt 7y agoIts not the same: someone unwinding broad positions could sell anti-cyclical stocks that did not fall too hard and keep the ones lowest. Someone with index funds has no choice: has to dump the good and the bad.
- jonknee 7y agoSure, which also happens every time there's a big down move in the market. Actually per prospect theory it is often the best performers that get sold first: https://en.wikipedia.org/wiki/Disposition_effect https://en.wikipedia.org/wiki/Disposition_effect Regardless, my point is smart stock pickers will come in and bid up companies that get oversold. No damage done unless you tried to time the market in your IRA and sold at the bottom. People who continue automatic purchases of broad indexes will be happy (at some point!) for the discount.
- ummonk 7y agoThere are plenty of value stock ETFs out there. You don't have to go with an index fund.
- conanbatt 7y agoNobody has to, but too many have, thats the whole point.
- jonknee 7y agoWow, a whole $86m or .4% of SNAP!
- lordgrenville 7y agoWell not because it was a crappy stock, but because of their dual-class share structure. (Meaning minority shareholders can retain majority voting rights.) https://www.cnbc.com/2017/08/01/snapchat-excluded-from-sp-500-what-does-it-mean.html https://www.cnbc.com/2017/08/01/snapchat-excluded-from-sp-50...
- kgwgk 7y agoThe S&P 500 has a requirement for inclusion in the index that keeps out lots of crappy companies: positive earnings in the most recent quarter and the last twelve months.
- deleted 7y ago[deleted]