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Ah, so you'd like the passive broad market index which contains the 500 biggest good companies? Do tell us if you find one I guess.
by l23k4 4mo ago
Ah, so you'd like the passive broad market index which contains the 500 biggest good companies?
Do tell us if you find one I guess.
- Animats 4mo agoThat's what "value funds" do.
- clbrmbr 4mo agoBut do they historically beat the S&P 500?
- epolanski 4mo agoYes, but not in the last decade or so. In any case, it's been only in the last years that we have had an explosion of a huge variety of funds with low fees, so some of these product strategies need to be retro fitted for a time they did not exist.
- infecto 4mo agoPlease cite funds that beat passive indexes over long periods of time.
- epolanski 4mo agoMedallion, Renaissance, Dodge, Sequoia. But I don't think that's what you were really asking.
- infecto 4mo agoInteresting those are value funds? Of course that was not what I was asking or what this thread was about.
- epolanski 4mo agoYour question is still not what you're asking. Passive funds do nothing but follow indexes, so what you're really asking is "have value indexes ever beaten the general sp500 index?". And the answer is yes, e.g. both the S&P 500 Value Index and S&P 500 Pure Value Index have beaten the S&P 500 historically. Small Cap indexes, have also *significantly* outperformed the S&P 500 from 1927 till today (a compounded 13.1% annual growth). Value stocks represent companies whose price-to-book is particularly attractive compared to the underlying business, and since investing is tied by the sell/buy ratio, buying at a discount improves it. Needless to say, value stocks require more risk, and risk is directly related to potential growth. Small caps, are both riskier and have a much larger room to grow, they have significantly outperformed the SP500 since 1927. Neither value nor small caps have done well, in the last decade, as the financial markets have multiple times provided better returns to a small but heavy portion of the market that was neither risky nor at any point had particularly attractive price-to-book ratios.
- infecto 4mo agoNo you’re just assuming what I am asking. You have proven my point so thank you. No examples and lots of buts and exceptions. We are probably talking around each other to some degree but that’s ok!
- epolanski 4mo agoNot sure what I have proven. I gave you numbers and names of indexes that have historically beaten the S&P 500 index in the value category. All of those have one or more ETFs that replicate that index. There's an extensive amount of scientific literature talking about the outperformance of value and small caps to the broader market, starting from Nobel price winning Eugene Fama.
- infecto 4mo agoNo you provided examples with but statements and a few of the examples are private close ended funds.
- chvid 4mo agoYou can just pick stocks - if you pick a fairly low number of large stocks in broad categories with correct weight, you will track the index.
- twiceaday 4mo agoAnd the relative values of those stocks will shift requiring rebalancing. You might be able to do that with new dollars for a while but hopefully, eventually, the swings are much more than new dollars and then what? Pay capital gains tax on sales to rebalance? Convince yourself the new random allocation is fine?
- yorwba 4mo agoI thought the point of index funds weighting by market cap is that they don't require rebalancing, because the weight of stocks in the index exactly tracks price movements. You just keep holding the exact same number of shares, and more valuable stocks automatically take up more of your portfolio.
- baobabKoodaa 4mo ago(deleted)
- yorwba 4mo agoIf you pick stocks with the correct weight to track the index, you're effectively running an index fund. And so you don't have to rebalance to keep tracking the index.
- jimmydorry 4mo agoIndexes rebalance frequently. The "correct weight" today, won't be the correct weight in a year.
- UncleDiaz12 4mo ago
- basch 4mo ago[flagged]
- WhrRTheBaboons 4mo agoESGV
- throw0101a 4mo ago> Ah, so you'd like the passive broad market index which contains the 500 biggest good companies? And a reminder: not just "good" now, but good over time. Good companies turn bad (Apple almost went bankrupt), and bad companies can become good (see again Apple; in the UK, recently Rolls-Royce).
- w4der 4mo agoRolls-Royce the luxury car or power plant manufacturer?
- youngtaff 4mo agoPower plant - the car company is owned by BMW
- throw0101a 4mo agoAerospace/defence: * https://en.wikipedia.org/wiki/Rolls-Royce_Holdings https://en.wikipedia.org/wiki/Rolls-Royce_Holdings 90 in 2022 to about 1100 now: * https://www.londonstockexchange.com/stock/RR./rolls-royce-holdings-plc/company-page https://www.londonstockexchange.com/stock/RR./rolls-royce-ho... Interesting interview with the CEO, Tufan Erginbilgiç: * https://www.youtube.com/watch?v=yYkBpzq5Sqw https://www.youtube.com/watch?v=yYkBpzq5Sqw
- srj 4mo agoTo me it's more about how real the financial strength of the company is versus being propped up on some shady accounting. Not sure if that was the case with Carvana or any of these new IPOs, but personally I have my nest egg in the S&P and don't want sharks abusing the index for their pump and dump exit strategy.
- forlorn_mammoth 4mo agoNo, but how about the 500 that have been profitable under GAAP accounting rules for at least 12 months have a public float of at least 10% (so that new investors have some governance rights) have traded for at least 12 months (and won't have sudden changes in public float or shares available due to lockups and recent listing)
- l23k4 4mo agoWhy is that set of rules particularly good?
- bigbuppo 4mo agoMove slow, fix things.
- l23k4 4mo agoWould approximately 30 years not have been a long enough time horizon to move on this, or what?
- disgruntledphd2 4mo agoUltimately, it's consistency that's more important with stuff like this (IMO, obviously).
- dudeinhawaii 4mo agoNo offense but your responses sound like AI or engagement farming. I think the "why are these rules good" is self-evident to anyone who read the comment.
- l23k4 4mo ago[flagged]
- maplethorpe 4mo ago> Why would anyone "engagement farm" on HN? That's crazy. All sorts of reasons! One is that when you reach 1000 karma, you gain the ability to downvote comments. You seem like a smart person. I'm sure you can think of some reasons why that might be useful.