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This seems like a good time to remind myself of Seth Klarman's observation: that an index fund, by its nature, must occasionally dump perfectly good investments
by kjellsbells 1y ago
This seems like a good time to remind myself of Seth Klarman's observation: that an index fund, by its nature, must occasionally dump perfectly good investments and buy worse ones simply because they need the latter in the basket that the index represents.
If you are, say, in FSKAX at Fidelity, and suddenly "OAI" lists for a gazillion dollars, you might suddenly be quite overweight in a stock that you don't care for. Nvidia and the rest are already warping such funds.
- twiceaday 1y agoThis is a critique of basketed index funds not total stock market index funds like FSKAX. When that observation is applied to FSKAX it reads like this "An index fund, by its nature, must occasionally dump stock I like and buy stock I don't like simply because the entire stock market dumped the stock I like and bought the stock I don't like."