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Yes, and not only that, but the index funds a skewed towards entities with large market caps. Someone could make their own "index fund" with 10% of it allocate

Yes, and not only that, but the index funds a skewed towards entities with large market caps. Someone could make their own "index fund" with 10% of it allocated to FAANG, maybe 20% of it in the largest tech names overall, and then a distribution of the largest market cap names, and lo and behold, one has an s&p 500 "index fund". Tesla's about to be added to the S&P 500. There are strong opinions on both sides - it's going up, no, it's going down. You don't have much of a choice if you're a Boglehead who bought into the S&P 500, you're just in it for the ride.

throw0101a 6y ago
> Yes, and not only that, but the index funds a skewed towards entities with large market caps. There are index funds of every publicly traded company in the US: * https://en.wikipedia.org/wiki/Russell_3000_Index https://en.wikipedia.org/wiki/Russell_3000_Index Vanguard themselves have changed things so that employees no longer have the option of choosing the S&P 500 fund in their own retirement accounts, but rather the Total Market fund: * https://www.marketwatch.com/story/vanguard-thinks-its-own-employees-should-own-this-fund-not-the-sp-500-theyre-right-2018-06-08 https://www.marketwatch.com/story/vanguard-thinks-its-own-em... * https://www.marketwatch.com/story/bogle-explains-why-vanguard-employees-wont-have-a-flagship-sp-500-fund-in-their-401k-2018-06-07 https://www.marketwatch.com/story/bogle-explains-why-vanguar... > You don't have much of a choice if you're a Boglehead who bought into the S&P 500, you're just in it for the ride. Anyone investing in equities is just in it for the ride, as it is impossible to predict what will happen: * https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street An individual's best bet, long term: buy as much of 'The Market' as you can. The greater, the better. The S&P 500 is simply a smaller portion of the market, and while not bad, may not be ideal: * https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index/ https://www.pwlcapital.com/should-you-invest-in-the-sp-500-i...
- itsoktocry 6y ago
  >Anyone investing in equities is just in it for the ride, as it is impossible to predict what will happen So people like Jim Simons are merely the luckiest people alive? The average person earns the average market return, less fees; that's a tautology. Unless you have some reason to believe you aren't average, most people are better off following your advice. It's what I do, personally. But the idea that no one is winning at this game flies in the face of a lot of evidence.
  - ryandrake 6y ago
    There's always someone out of approx. 1 million who will flip a coin heads 20 times in a row. The guy who does is always the poster boy for active management. You can (of course only after the fact) interview him, ask him how he thinks he became such a good coin flipper, and read investment books about him, or just passively invest and accept market returns.
  - throw0101a 6y ago
    > So people like Jim Simons are merely the luckiest people alive? No one reasonable, not even Fama and French who came up with the Efficient Market Hypothesis, claim that the market is 100% efficient. And given that no one knows anything about Jim Simon's Medallion Fund, we actually have no idea how successful they are. But given the quantities and/or trading volumes possibly involved, they don't have to be right very often. In a perfectly efficient market, it's 50/50 whether you'll get the better end of the deal. Now think of a casino: for many games the house's edge is only 1.5% (e.g. blackjack, baccarat, three-card poker). * https://www.gambling.com/ca/online-casinos/strategy/10-casino-games-with-the-lowest-house-edge-18600 https://www.gambling.com/ca/online-casinos/strategy/10-casin... * https://wizardofodds.com/gambling/house-edge/ https://wizardofodds.com/gambling/house-edge/ But that's still enough for a casino to make make money. It may be the Simons et co have just an edge of a few percent points, but they make up their profit on volume. > But the idea that no one is winning at this game flies in the face of a lot of evidence. There are plenty of people that are winning. It's just the people that win one year rarely win a few years in a row (never mind 10+): * https://www.tma-invest.com/spiva-data-reveals-15-years-of-active-underperformance/ https://www.tma-invest.com/spiva-data-reveals-15-years-of-ac... * https://dividendstrategy.ca/what-is-spiva/ https://dividendstrategy.ca/what-is-spiva/
marvin 6y ago
Index funds are strongly a momentum investment strategy. I don’t see this appreciated so often. But of course, a properly diversified index fund portfolio contains much more than just the S&P500. Mine has some thousand global stocks, on the order of 5000.
- imtringued 6y ago
  There is a weird argument by one of the commenters further up. Index funds are too risky because are not diversified enough and mostly focus on tech companies (mostly wrong). Why not buy 5000 stocks individually? Who is going to pick 5000 stocks by hand?
- itsoktocry 6y ago
  Yeah, one of the oddest arguments I see from EMH pumpers is "dude, just by SPY, you can't beat the market". SPY is hardly diversified. A far better and pretty easy portfolio consists of a global financial assets allocation: US stocks and bonds, developed world ex-US stocks and bonds, emerging markets stocks and bonds, real estate and commodities. 10-12 ETFs will do it.

throw0101a 6y ago

> Yes, and not only that, but the index funds a skewed towards entities with large market caps. There are index funds of every publicly traded company in the US: * https://en.wikipedia.org/wiki/Russell_3000_Index https://en.wikipedia.org/wiki/Russell_3000_Index Vanguard themselves have changed things so that employees no longer have the option of choosing the S&P 500 fund in their own retirement accounts, but rather the Total Market fund: * https://www.marketwatch.com/story/vanguard-thinks-its-own-employees-should-own-this-fund-not-the-sp-500-theyre-right-2018-06-08 https://www.marketwatch.com/story/vanguard-thinks-its-own-em... * https://www.marketwatch.com/story/bogle-explains-why-vanguard-employees-wont-have-a-flagship-sp-500-fund-in-their-401k-2018-06-07 https://www.marketwatch.com/story/bogle-explains-why-vanguar... > You don't have much of a choice if you're a Boglehead who bought into the S&P 500, you're just in it for the ride. Anyone investing in equities is just in it for the ride, as it is impossible to predict what will happen: * https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street An individual's best bet, long term: buy as much of 'The Market' as you can. The greater, the better. The S&P 500 is simply a smaller portion of the market, and while not bad, may not be ideal: * https://www.pwlcapital.com/should-you-invest-in-the-sp-500-index/ https://www.pwlcapital.com/should-you-invest-in-the-sp-500-i...

itsoktocry 6y ago
>Anyone investing in equities is just in it for the ride, as it is impossible to predict what will happen So people like Jim Simons are merely the luckiest people alive? The average person earns the average market return, less fees; that's a tautology. Unless you have some reason to believe you aren't average, most people are better off following your advice. It's what I do, personally. But the idea that no one is winning at this game flies in the face of a lot of evidence.
- ryandrake 6y ago
  There's always someone out of approx. 1 million who will flip a coin heads 20 times in a row. The guy who does is always the poster boy for active management. You can (of course only after the fact) interview him, ask him how he thinks he became such a good coin flipper, and read investment books about him, or just passively invest and accept market returns.
- throw0101a 6y ago
  > So people like Jim Simons are merely the luckiest people alive? No one reasonable, not even Fama and French who came up with the Efficient Market Hypothesis, claim that the market is 100% efficient. And given that no one knows anything about Jim Simon's Medallion Fund, we actually have no idea how successful they are. But given the quantities and/or trading volumes possibly involved, they don't have to be right very often. In a perfectly efficient market, it's 50/50 whether you'll get the better end of the deal. Now think of a casino: for many games the house's edge is only 1.5% (e.g. blackjack, baccarat, three-card poker). * https://www.gambling.com/ca/online-casinos/strategy/10-casino-games-with-the-lowest-house-edge-18600 https://www.gambling.com/ca/online-casinos/strategy/10-casin... * https://wizardofodds.com/gambling/house-edge/ https://wizardofodds.com/gambling/house-edge/ But that's still enough for a casino to make make money. It may be the Simons et co have just an edge of a few percent points, but they make up their profit on volume. > But the idea that no one is winning at this game flies in the face of a lot of evidence. There are plenty of people that are winning. It's just the people that win one year rarely win a few years in a row (never mind 10+): * https://www.tma-invest.com/spiva-data-reveals-15-years-of-active-underperformance/ https://www.tma-invest.com/spiva-data-reveals-15-years-of-ac... * https://dividendstrategy.ca/what-is-spiva/ https://dividendstrategy.ca/what-is-spiva/

marvin 6y ago

Index funds are strongly a momentum investment strategy. I don’t see this appreciated so often. But of course, a properly diversified index fund portfolio contains much more than just the S&P500. Mine has some thousand global stocks, on the order of 5000.

imtringued 6y ago
There is a weird argument by one of the commenters further up. Index funds are too risky because are not diversified enough and mostly focus on tech companies (mostly wrong). Why not buy 5000 stocks individually? Who is going to pick 5000 stocks by hand?
itsoktocry 6y ago
Yeah, one of the oddest arguments I see from EMH pumpers is "dude, just by SPY, you can't beat the market". SPY is hardly diversified. A far better and pretty easy portfolio consists of a global financial assets allocation: US stocks and bonds, developed world ex-US stocks and bonds, emerging markets stocks and bonds, real estate and commodities. 10-12 ETFs will do it.