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I'm not saying average investors are qualified to pick index funds or stocks. I'm saying they really ought to be. Money is a form of power, and blindly applyin

I'm not saying average investors are qualified to pick index funds or stocks. I'm saying they really ought to be. Money is a form of power, and blindly applying it in a spot just because everyone else is doing the same strikes me as not optimal. Our saving grace is probably that the S&P500 is extraordinarily well-chosen. It's diversified across place, industry, and to some extent size. And it helps that America is an economic machine for the ages.

gruez 3y ago
> I'm not saying average investors are qualified to pick index funds or stocks. I'm saying they really ought to be. In the sense they "ought" to vote, or they should do it because it would result in better returns for them personally? I don't think the former is a good reason, because I don't think the average investor is going to do a better job at allocating capital than wall st analysts. The latter has empirically been proven false. Actively managed funds have collectively underperformed passively managed funds, and daytrading retail investors almost always lose money. >Money is a form of power, and blindly applying it in a spot just because everyone else is doing the same strikes me as not optimal. People investing money in passive funds aren't messing with the price discovery process. Since they buy everything in proportion to market cap, they're not picking winners or losers. As long as some active participants exist, price discovery will still happen. If their numbers drop critically low, the market might be more be less accurate or be more susceptible to manipulation, but we're not anywhere near that point yet. In contrast, encouraging "average investors" to pick stocks absolutely does mess up the price discovery process. The average person is dumb and spends way too much time chasing whatever they heard on news yesterday night. A horde of retail investors likely reduces the overall "intelligence" of the market (through idiotic trades) and likely results in losses for them (from more sophisticated investors taking advantage of their behavior).

gruez 3y ago

> I'm not saying average investors are qualified to pick index funds or stocks. I'm saying they really ought to be. In the sense they "ought" to vote, or they should do it because it would result in better returns for them personally? I don't think the former is a good reason, because I don't think the average investor is going to do a better job at allocating capital than wall st analysts. The latter has empirically been proven false. Actively managed funds have collectively underperformed passively managed funds, and daytrading retail investors almost always lose money. >Money is a form of power, and blindly applying it in a spot just because everyone else is doing the same strikes me as not optimal. People investing money in passive funds aren't messing with the price discovery process. Since they buy everything in proportion to market cap, they're not picking winners or losers. As long as some active participants exist, price discovery will still happen. If their numbers drop critically low, the market might be more be less accurate or be more susceptible to manipulation, but we're not anywhere near that point yet. In contrast, encouraging "average investors" to pick stocks absolutely does mess up the price discovery process. The average person is dumb and spends way too much time chasing whatever they heard on news yesterday night. A horde of retail investors likely reduces the overall "intelligence" of the market (through idiotic trades) and likely results in losses for them (from more sophisticated investors taking advantage of their behavior).