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While this seems (incredibly) scary it makes me think that this could be a huge opportunity for entrepreneurs (and some are currently undertaking it). The fint

While this seems (incredibly) scary it makes me think that this could be a huge opportunity for entrepreneurs (and some are currently undertaking it). The fintech entrepreneur can carefully paint the picture of the dangers of the big 3 while advocating for smaller index funds for a smaller set of investors. This smaller set of investors can have stocks based on their individual goals and interests. You just duplicate this over a lot more funds. The returns won’t be as high initially but if the entrepreneur can convince customers that this must be done it should help spurn new markets towards sustainability or carbon reduction etc. Edit: plz tell me if I totally misunderstood the article.

toomuchtodo 7y ago
You just described M1 Finance (custom funds users can construct). Google Warren Buffett’s Long Bet about passive vs active fund management (he won the passive argument). Even sophisticated active investors are having a tremendously difficult time achieving passive returns net fees. If you’re not a sophisticated investor, I’d implore you to be cognizant of the challenges you’ll face attempting active investment strategies, especially if you’re investing retirement funds. Passive index investing might not be perfect, but it seems to be the least worst option when evaluating fund costs and risk adjusted returns, and we’re aways off from significant second order effects.
- pishpash 7y ago
  There are other use cases than returns, sometimes it has to do with availability of funds or tax issues that constrain the possibilities. Even something as simple as the full spectrum of risk tolerances and time-horizons isn't well served by existing index retirement funds (they all skew to be highly risky and equity focused). It's better to have the running of an index fund be a separate service from the selection of its holdings or the choosing of goals. Right now if you have a slightly different goal than the horde, you can only go to expensive active funds, advisors, or spend a great deal of time self-managing.
  - deleted 7y ago
    [deleted]
throwawayhhakdl 7y ago
I think the opportunity lies in the other direction. Say that fund managers for index funds aren’t generally accountable for performance (assuming they actually comply with the index. Differentiate the funds on their voting strategy. I don’t really give a crap about my investments if they’re well diversified across large US companies. But I would 100% prefer a fund that promised to vote for climate and civil rights issues.

toomuchtodo 7y ago

You just described M1 Finance (custom funds users can construct). Google Warren Buffett’s Long Bet about passive vs active fund management (he won the passive argument). Even sophisticated active investors are having a tremendously difficult time achieving passive returns net fees. If you’re not a sophisticated investor, I’d implore you to be cognizant of the challenges you’ll face attempting active investment strategies, especially if you’re investing retirement funds. Passive index investing might not be perfect, but it seems to be the least worst option when evaluating fund costs and risk adjusted returns, and we’re aways off from significant second order effects.

pishpash 7y ago
There are other use cases than returns, sometimes it has to do with availability of funds or tax issues that constrain the possibilities. Even something as simple as the full spectrum of risk tolerances and time-horizons isn't well served by existing index retirement funds (they all skew to be highly risky and equity focused). It's better to have the running of an index fund be a separate service from the selection of its holdings or the choosing of goals. Right now if you have a slightly different goal than the horde, you can only go to expensive active funds, advisors, or spend a great deal of time self-managing.
- deleted 7y ago
  [deleted]

throwawayhhakdl 7y ago

I think the opportunity lies in the other direction. Say that fund managers for index funds aren’t generally accountable for performance (assuming they actually comply with the index. Differentiate the funds on their voting strategy. I don’t really give a crap about my investments if they’re well diversified across large US companies. But I would 100% prefer a fund that promised to vote for climate and civil rights issues.