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Index funds hold underlying assets under management... You are paying for a slice of the underlying assets... All slices of the pie are accounted for and it doe

Index funds hold underlying assets under management... You are paying for a slice of the underlying assets... All slices of the pie are accounted for and it doesn't create anything new. Not sure how that relates to machines reproducing human creative efforts.

dehrmann 4y ago
The gripe with index funds is that they wouldn't work if everyone used them.
- mensetmanusman 4y ago
  With a strong rule of law, they probably would.
  - ghaff 4y ago
    What does a strong rule of law have to do with it? The issue is that index funds depend on there being a price discovery mechanism on the underlying equities. If no one were buying and selling individual equities there would be no price discovery.
- ape4 4y ago
  The DOW 30 has 30 successful companies in it. If one of these companies falters it will be removed from the index and replaced by an up-and-coming company. It would be there even if people invested or not.
  - scarmig 4y ago
    How does a company faltering or succeeding end up being reflected in its membership of the Dow? If relative shifts in stock price are the main causal mechanism, then that's exactly the issue: universal passive index investing (roughly) means that there won't be relative shifts in price.
- skybrian 4y ago
  Good thing everyone doesn't do it then! Why would professional traders stop trading? It's a common fallacy that things need to work for everyone or they're no good. We can do different things. Specialization is useful.
zerocrates 4y ago
They don't mean that it's creating anything but just that index funds depend on "real" market participants to buy and sell on good and bad news, forecasts, etc. If you imagine them expanding to where there are no (or almost no) real buyers and sellers, then they don't really work, and also the market doesn't really work. Though I think you'd have to get to a very (maybe impossibly) high share of passive investors for this to really occur. That's their analogy to ML/AI art: imagine it takes over and puts most artists out of business... are the models just stuck, taking their own output as input and not really improving? Similarly here it's maybe not possible for this to happen to such an extreme degree that the imagined problem would come to pass.

dehrmann 4y ago

The gripe with index funds is that they wouldn't work if everyone used them.

mensetmanusman 4y ago
With a strong rule of law, they probably would.
- ghaff 4y ago
  What does a strong rule of law have to do with it? The issue is that index funds depend on there being a price discovery mechanism on the underlying equities. If no one were buying and selling individual equities there would be no price discovery.
ape4 4y ago
The DOW 30 has 30 successful companies in it. If one of these companies falters it will be removed from the index and replaced by an up-and-coming company. It would be there even if people invested or not.
- scarmig 4y ago
  How does a company faltering or succeeding end up being reflected in its membership of the Dow? If relative shifts in stock price are the main causal mechanism, then that's exactly the issue: universal passive index investing (roughly) means that there won't be relative shifts in price.
skybrian 4y ago
Good thing everyone doesn't do it then! Why would professional traders stop trading? It's a common fallacy that things need to work for everyone or they're no good. We can do different things. Specialization is useful.

zerocrates 4y ago

They don't mean that it's creating anything but just that index funds depend on "real" market participants to buy and sell on good and bad news, forecasts, etc. If you imagine them expanding to where there are no (or almost no) real buyers and sellers, then they don't really work, and also the market doesn't really work. Though I think you'd have to get to a very (maybe impossibly) high share of passive investors for this to really occur. That's their analogy to ML/AI art: imagine it takes over and puts most artists out of business... are the models just stuck, taking their own output as input and not really improving? Similarly here it's maybe not possible for this to happen to such an extreme degree that the imagined problem would come to pass.