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Are these ETFs, target date retirement funds, etc. protected against class action lawsuits from shareholders who end up holding the bag due to the inclusion of
by hunter2_ 3y ago
Are these ETFs, target date retirement funds, etc. protected against class action lawsuits from shareholders who end up holding the bag due to the inclusion of fraudulent stocks like this? Obviously waivers are signed about how performance is never guaranteed, but that's a bit different from a need to timely exit positions in fraudulent companies.
- zozbot234 3y agoThe whole point of passive investing is to not pick winners and losers, to leave that part of the job to professional speculators (including, yes, short sellers). Because you aren't going to do any better than them on average, even if they do on occasion pick some duds (like Nikola).
- bsdpufferfish 3y agoImagine you invested in the index minus Nikola. This isn't improbable as several hours of due diligence would have raised concerns. This shows that the choice of stocks included in an index is not arbitrary. You don't get "better on average" automatically just by buying the 500 stocks on a list someone sold to you.
- sgerenser 3y agoThe share of Nikola in a total-market index fund was so tiny as to be negligble. If one person invested $100K in a total market fund, and another put together thier own "total market minus nikola" fund, even with zero trading fees, the latter might be up maybe $10 or so over the former. After fees and slippage, they're almost certainly behind.
- hunter2_ 3y agoSure, but I'm talking about when the professionals that you leave it to end up being negligent. Picking a dud occasionally isn't negligent, but I'm wondering if continuing to hold something fraudulent longer than reasonably necessary to ingest damning evidence and dump it might be.
- balderdash 3y agoThis might be the case if you paid a professional manager to actively manage a portfolio - but not when you are paying the manager to track an index.