4 ms·
>These funds buy based on market cap of the stock. There might potentially be a problem if ETFs owned the entire market, but owning half the market cap still a
by fsckboy 3y ago
>These funds buy based on market cap of the stock.
There might potentially be a problem if ETFs owned the entire market, but owning half the market cap still allows for market pricing of the other half. I don't see that you are pointing out a problem?
The market put a price on NKLA, and you are simply claiming that you know better than the market (to hell with the wisdom of crowds); such beliefs are generally unfounded. One example does not tell a convincing story, do you have a portfolio of disbelief that you have tracked the performance of?
- tony69 3y agoYou don't need to be at the limit case of 100% of the market owned by passive funds to start creating problems [1]. Still, my point was that passive EFTs create a constant bid on company shares, disregarding any fundamentals. The speculative mania of 2021 artificially inflated the market cap of many SPACs like NKLA - speculators have all the rights to do this, but passive ETFs will blindly follow and increase their allocation based on market cap (the effect goes both ways, as price goes down allocation decreases). Who has been buying NKLA shares? Vanguard, for one: look at fund flows since 2021, mostly positive https://etfdb.com/etf/VTI/#fund-flows https://etfdb.com/etf/VTI/#fund-flows most of those inflows result in purchases of NKLA shares. [1] https://www.acheroninsights.com/blog/wbdvi4uarbd3hdssx3f5kaffkz6q28 https://www.acheroninsights.com/blog/wbdvi4uarbd3hdssx3f5kaf...