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Or is the active money also in the big companies, because even though there are good opportunities elsewhere, the steady ETF flows just keep pumping the big com

Or is the active money also in the big companies, because even though there are good opportunities elsewhere, the steady ETF flows just keep pumping the big companies even faster?

caminante 1y ago
To your point, passive indexing critics who under weighted Nvidia, a single stock, haven't had good runs v. peers. Meanwhile, check out the recent Abivax pop. Drug trial results sent shares to the moon, outperforming the S&P500. Stock picking is so...damn...hard.
- jghn 1y ago
  The way I've been looking at this is that when The Big One happens and the average American loses their shirt via the crash of the giant ETFs, the naysayers who managed to have been invested in the things that don't crash will zig when everyone else is zagging. However: between now and then they're likely underperforming as you point out. And when it happens most people who believe themselves to be ziggers will have chosen the wrong zig candidate. I really really worry about the ETF world, but to do anything else puts me at even higher risk.
  - BobaFloutist 1y ago
    Also the longer you're in an underperforming hedge, the worse the crash has to be and the better your hedge has to perform to be worth it. You could be completely right about a recession/crash, but if you miss it by 5 years, your net outcome could still be worse than if you just sat and rode it out start to finish.
loeg 1y ago
No? ETF inflows from passive, market-index funds are evenly distributed across the market, weighted by market cap. They don't concentrate to only the big companies.
- plantain 1y ago
  Inflows are not evenly distributed across the market. The S&P500 ETF's dominate.
  - loeg 1y ago
    The S&P500 represents 87% of the US market (~$54 of 63T). Inflows to S&P500 funds are evenly distributed among that 87% (by market cap). I think concerns about market concentration are usually expressed about, e.g., the Mag 7 being 31% of the US market (~$19 / 63T) moreso than the next biggest 493 stocks. S&P 500 inflows don't overweight the Mag 7 relative to any other S&P 500 component.

Or is the active money also in the big companies, because even though there are good opportunities elsewhere, the steady ETF flows just keep pumping the big companies even faster?

caminante 1y ago

To your point, passive indexing critics who under weighted Nvidia, a single stock, haven't had good runs v. peers. Meanwhile, check out the recent Abivax pop. Drug trial results sent shares to the moon, outperforming the S&P500. Stock picking is so...damn...hard.

jghn 1y ago
The way I've been looking at this is that when The Big One happens and the average American loses their shirt via the crash of the giant ETFs, the naysayers who managed to have been invested in the things that don't crash will zig when everyone else is zagging. However: between now and then they're likely underperforming as you point out. And when it happens most people who believe themselves to be ziggers will have chosen the wrong zig candidate. I really really worry about the ETF world, but to do anything else puts me at even higher risk.
- BobaFloutist 1y ago
  Also the longer you're in an underperforming hedge, the worse the crash has to be and the better your hedge has to perform to be worth it. You could be completely right about a recession/crash, but if you miss it by 5 years, your net outcome could still be worse than if you just sat and rode it out start to finish.

loeg 1y ago

No? ETF inflows from passive, market-index funds are evenly distributed across the market, weighted by market cap. They don't concentrate to only the big companies.

plantain 1y ago
Inflows are not evenly distributed across the market. The S&P500 ETF's dominate.
- loeg 1y ago
  The S&P500 represents 87% of the US market (~$54 of 63T). Inflows to S&P500 funds are evenly distributed among that 87% (by market cap). I think concerns about market concentration are usually expressed about, e.g., the Mag 7 being 31% of the US market (~$19 / 63T) moreso than the next biggest 493 stocks. S&P 500 inflows don't overweight the Mag 7 relative to any other S&P 500 component.