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The index fund is holding the underlying stock, largely. The challenge is that if say 5% of their fund holders sell their shares in the fund, the fund has to s
by secabeen 7y ago
The index fund is holding the underlying stock, largely. The challenge is that if say 5% of their fund holders sell their shares in the fund, the fund has to sell the underlying stock to generate the cash to pay out. Most funds have a rule in their documents that if you are a large fundholder (holding 1% or more of the fund) and you sell, they can hand you stocks directly rather than selling them and giving you cash, but that doesn't work it it's tens of thousands of small fund holders selling.
- wbl 7y agoSo? They sell others buy. If I hear there is a squeeze and have cash I'll throw it in: who wouldn't? It's never the case that x٪ of the market can exit at once regardless of how it is owned.
- joyjoyjoy 7y ago"If I hear there is a squeeze and have cash I'll throw it in:" For how many billions will you buy? And why did you not throw it in in 2008? "who wouldn't?" People who are leveraged? "It's never the case that x٪ of the market can exit at once regardless of how it is owned." You may not have heard it. But this is called a stock market crash. One is expected soon. So enjoy the ride and keep your money dry that you can "throw it in"
- vkou 7y agoSo? If 5% of all stockholders sell their stock, that's going to cause a downward price movement, too. What is special about an ETF, that makes this situation any worse?