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The point is that the ETF tracks its index, so what does it even mean to say ETF crash? Isn't that just the tracked stocks crashing? The ETF has little to do wi
by epistasis 9mo ago
The point is that the ETF tracks its index, so what does it even mean to say ETF crash? Isn't that just the tracked stocks crashing? The ETF has little to do with it. But if there is some other risk that's warrants the ETF label, that's very very interesting and should be discussed! It would be little known or novel ETF mechanics.
- triceratops 9mo ago> so what does it even mean to say ETF crash ? Isn't that just the tracked stocks crashing? Yes. I've learned to differentiate between the words people use and what they actually mean, rather than being literal. Since index ETFs make up a large portion of people's investments they fear the value of those ETFs tanking. Obviously this is due to the underlying stocks' prices dropping This has happened many times in the past, most (in)famously in 1929.
- epistasis 9mo agoWell that's the crux of it, isn't it? How do you know what they really mean, if not through the words? You have to impose a mental model on the speaker, which we of course do anyways. Saying ETF crash specifically sounds like there is an idea there, and lots of people talk about thinking that ETFs specifically have problems that owning stocks directly would not have, so in my mind the model is that the speaker has an idea about how ETFs cause the crash through hidden risk. And since hidden risk is behind most crashes, it's definitely an interesting direction to ask about.
- groundzeros2015 8mo agoIf you own an ETF and the underlying assets crash the ETF value has gone down. Additional failure modes exist due to the mechanics of the ETF, but from context we can tell the original comment was about risks to the large amount of money invested in ETFs