Actual ways in which a large Index Fund / ETF could "blow up"

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Seppia
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Actual ways in which a large Index Fund / ETF could "blow up"

Post by Seppia »

I was listening to the latest Masters in Business podcast with Ned Davis (hosted by Barry Ritholtz - it's an excellent pod btw, here's the link in case you're interested https://www.bloomberg.com/news/audio/20 ... ness-audio ), and talking about index funds being all the rage today, he goes on to say something along the lines of

"when a good idea gets too popular it can blow up, I think we're close"

I certainly see many characteristics of a bubble:

- There are now ETFs tracking "indexes" that are either made up or idiotically built (ie the junior gold miner index that got so big it started buying larger gold miners)
- There are too many of them
- The belief in index funds has become a quasi religion
- Inflows in indexes are at all times high and keep booming
- In general, any time people started to believe that there is no point in thinking about what you are buying and why, it has not ended well

So I can totally see how this can "blow up", if we define "blowing up" as "suffer a VERY severe correction" sometimes in the future.

But, my question is: can the largest non-leveraged equity Index ETFs (think VTI, VGK, etc) actually "blow up" as in "see their value go to zero"?

I would be fine with the first scenario (I would actually welcome it, as I generate relatively large surpluses of cash every month and have been slowly building up dry powder recently), but the second one would obviously be catastrophic*

My understanding was that when you're holding an index ETF/fund (that actually buys the underlying stocks), vanguard/blackrock/whatever is only holding the stocks for you: if the issuer (Vanguard, Blackrock) bankrupts/explodes/fails catastrophically, YOU still own the underlying stocks.
In this case, the risk of the index value going to zero is negligible/relegated to EOTWAWKI scenarios.

Or am I missing something?

*well, not exactly catastrophic but very bad
currently, my assets are split 75-25 equities-CD/cash (no bonds as I live en europe and bonds provide risk in exchange for negative return), from 90-10 a year ago
75% equities are split 50-50 in indexes and individual stocks
indexes are the passive part: dca half my monthly savings in brad ETFs (80% europe, 20% emerging)
Individual stocks are the active part.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by jacob »

See viewtopic.php?t=7650

I don't know if fund companies would actually be able to redeem in-kind as some kind of emergency measure (this would probably be in the small print somewhere). What's happening in practice is that these large companies (Vanguard) are beginning to hold more cash just in case they are hit with a large amount of redemptions.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by ThisDinosaur »

A quick google search shows that about 20% to 42% (!) of money in stocks is from index funds. But that number may over represent the large cap stocks (S&P 500 components). I'm wondering, could you reduce your exposure to a flash crash type "blow up" by focusing on ETFs full of securities that are *under represented* in indexes?

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by IlliniDave »

Traditional Index funds are really just mutual funds that are managed at the lowest end of the cost spectrum. So as individual funds they run the same risks as any other mutual funds. There is no magic to them, the return they provide is the same as the stock market(s) (or market('s) segments) they track. If the stock market(s) "blow up" the funds will "blow up". If stock markets don't blow up, the funds won't. Unless maybe there is an individual management company who grossly mismanages a fund. But that is by no means applicable only to index funds. ETFs are a little different in that their shares are sold to third parties in a marketplace (and that's where you find all the oddball, sort of artificial, indices). But if the management absconds with the pool of shares ...

Even when you buy individual stocks they are "held" by a brokerage so they in principal are subject to the same risks that a share in a mutual fund is when it comes to bad behavior by an investment company.

It doesn't take much in the way of religious faith to believe that a mutual fund with a cap weighted portfolio of all the SP500 companies is going to return pretty much what the total return of the SP500 Index is. It might be an act of faith on my part that I don't think I'm smarter than the market and all the major players, making my odds of "beating the market" small. There's plenty of data to show that non-index mutual funds in the aggregate finish below index funds. The aggregate difference in return is the difference in cost to manage the respective funds. More a matter of arithmetic that rocket surgery or hoodoo. So if you don't trust companies that manage mutual funds or stocks in general, don't buy mutual funds. But there's no reason to be more mistrustful of index funds than any other type of mutual fund, nor to inherently mistrust companies that manage mutual funds more than those who manage simple brokerage accounts.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by IlliniDave »

ThisDinosaur wrote:
Tue Jun 20, 2017 11:51 am
A quick google search shows that about 20% to 42% (!) of money in stocks is from index funds. But that number may over represent the large cap stocks (S&P 500 components). I'm wondering, could you reduce your exposure to a flash crash type "blow up" by focusing on ETFs full of securities that are *under represented* in indexes?
Unfortunately as time goes on I believe it is the total market-type indices that will wind up being the largest, so there's probably increasingly less room for "escape". Index funds tend to be cap weighted so of course more of the money is distributed on the large cap side, but I suspect the proportional "pressure" they put on the different segments of the market is becoming increasingly uniform. A small cap portfolio is generally more risky than large cap, but the returns are potentially higher. If you have a strong stomach it might be worth the ride. But I wouldn't expect doing so makes a person immune to the evils of index funds.

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Seppia
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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by Seppia »

jacob wrote:
Tue Jun 20, 2017 10:32 am
See viewtopic.php?t=7650
Very interesting thread, thanks for the link.

@IlliniDave: I'm fully aware there's no more risk than with any other mutual fund.
I guess instead of writing my wall of text above I should have just kept it simple:

Is there any additional risk holding any large index fund VS individually holding the different securities associated with it?

I'm assuming the answer is no/extremely negligible.

So far reading Jacob's linked topic I would say there is none?

My alternative to very large index ETFs are individual stock, so I'm trying to understand if I'm bearing any added risk in exchange for the convenience.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by ThisDinosaur »

IlliniDave wrote:
Tue Jun 20, 2017 12:02 pm
I suspect the proportional "pressure" they put on the different segments of the market is becoming increasingly uniform.
This is exactly what I'm questioning. It may be true, but it may not be. Any ideas where to find the answer?

@Seppia
In the thread Jacob linked to, it is discussed that there *are* specific risks in owning the fund vs. owning the shares. Its a very narrow, specific risk of i.e. Vanguard folding and not being able to sell the client's shares for cash (all supply/no demand) as per contract.

It's not clear to me if that particular risk should be of greater concern than a run-of-the mill bubble, though. What I mean is, if too many investors are going into passive index funds, that should cause a bubble burst that affects stock pickers as well as indexers. In other words, market timers would do well but active stock pickers wouldn't.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by IlliniDave »

ThisDinosaur wrote:
Tue Jun 20, 2017 1:27 pm
IlliniDave wrote:
Tue Jun 20, 2017 12:02 pm
I suspect the proportional "pressure" they put on the different segments of the market is becoming increasingly uniform.
This is exactly what I'm questioning. It may be true, but it may not be. Any ideas where to find the answer?
Not really. I'm not even sure it is "proven" that Index funds broadly affect stock prices in a way such that it can be quantified. Consider a US total market fund with holdings in proportion to market cap. Hypothetically if such a fund held 1% of the entire US market, it would hold 1% of all APL shares outstanding, and continue all the way down to holding 1% of the smallest company's outstanding shares (even though the dollars are vastly different). If the fund grew to 2% of the total market it would add an additional 1% of outstanding shares of every company, large or small. Intuitively, whatever affect that fund has on the market should be proportionally the same on every stock in the index (in this example virtually every actively traded stock in the country). With the gradual trend towards total market indices versus SP500 indices, as well as the plethora of small and mid-cap index fund and ETF options that have arisen since the first SP500 index, it makes sense that money in index funds should begin to approach a distribution by cap weight that parallels the actual cap weight distribution of the market. Perfect alignment with the cap weight distribution of the market is inevitable If one believes that indexes are The Borg destined to devour the entire market.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by bryan »

"Mett Levine's Money Stuff" talks about index funds trends and more: https://forum.earlyretirementextreme.co ... f=3&t=8708

Covers the range of risks of the trend that he is aware of e.g. interplay between index maintainers, fund managers/companies, brokerages, exchanges, collusion, gravity of capital, etc. To me these risks are pretty interesting but ultimately "not that bad" (at the micro level.. maybe you can worry about the macro, societal/economic effects). The forum is also filled with discussion on these topics.

In the thread jacob points to, I make it clear in the first paragraph that I was trying to figure out if there were other risks than these to worry about. I don't think potential risks are adequately known/considered among the public. ETF/MUTF are a black box to me (like the various derivatives securities and packages).. I would prefer to run my own index/fund/portfolio (what's the difference? :lol: ) and buy stocks directly. Even better if I can have the paper certificate and if it acts as a bearer instrument. Alas, I would lose a lot of efficiencies if I did.

Hopeful that blockchains will change this..

There are quite a few obvious risks of centralization (speaking to "Vanguard the Brokerage") (that might/might not apply to a given situation), but you just have to guesstimate if the risks are worth it to have all the centralization perks e.g. buying/selling low fee funds at very low transaction costs or lots of liquidity. Is it penny wise, pound wise, but a black swan lurks?

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Seppia
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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by Seppia »

ThisDinosaur wrote:
Tue Jun 20, 2017 1:27 pm

@Seppia
In the thread Jacob linked to, it is discussed that there *are* specific risks in owning the fund vs. owning the shares. Its a very narrow, specific risk of i.e. Vanguard folding and not being able to sell the client's shares for cash (all supply/no demand) as per contract.
Aside from short time events, I don't see this as much different than owning stocks. The risk seems the same.
Which I consider almost non-existent by the way (doesn't mean it's insignificant): I would assume that at the right price supply will actually find demand.
Again I do not consider volatility as risk (its part of the journey unless one is a phenomenal stock picker), the risk I'm talking about here is complete loss of capital.
ThisDinosaur wrote:
Tue Jun 20, 2017 1:27 pm
It's not clear to me if that particular risk should be of greater concern than a run-of-the mill bubble, though. What I mean is, if too many investors are going into passive index funds, that should cause a bubble burst that affects stock pickers as well as indexers. In other words, market timers would do well but active stock pickers wouldn't.
I see it mostly as a bubble that affects all stocks equally.
In the late 90's, companies were adding ".com" to their name and doubling in value just because of that.
Don't see any major difference.

The point is, all new crises come for unexpected reasons that 99% of people did not see coming.
It seems clear to me that this religious "stocks always go up in the long term blah blah blah" thinking will sometimes be problematic.
I posted in the MMM forum that one should maybe expect lower 10-15 year returns for us equities, based on current valuations and their historic correlation with subsequent returns, and I was called a "market timer" by most.
I'm looking for reasons why, as it would be awesome to be among the 1% that more or less saw it coming.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by jacob »

Seppia wrote:
Tue Jun 20, 2017 9:49 am
My understanding was that when you're holding an index ETF/fund (that actually buys the underlying stocks), vanguard/blackrock/whatever is only holding the stocks for you: if the issuer (Vanguard, Blackrock) bankrupts/explodes/fails catastrophically, YOU still own the underlying stocks.
This is most likely wrong and not how such financial products are usually engineered. An index fund is not a warehouse that holds individual stocks for you, unlike a broker. Even if a broker went bankrupt, you may not be automatically guaranteed to recover all stocks. There's coverage for stocks (by the count) via SIPC which is similar to FDIC for bank accounts.

However, an index fund is different. You have a long position in the fund, e.g. VTSMX. Vanguard would have a matching short position in VTSMX. To hedge themselves, Vanguard would take a long position in the individual stocks in the index that matches the index. They could also hedge via the futures market. Various arbitragers ensure that the trading price (if it's an ETF) matches it's contents as per zero-arbitrage. This is forced by the stipulation about block redemption. Vanguard's ability to match their short VTSMX and their long basket is called the tracking-error. It reflects their exposure. Minimizing this requires liquidity and a functional market. This is why they carry a larger cash position now (in case those are lacking, like in a crash). In many ways index fund companies are structured exactly like a hedge fund would be with matching longs and shorts. It's just that they don't seek alpha but instead rely on size and charge a corresponding fee by percentage. It's thus in their interest to grow as large as possible.

If it's a mutual fund, the fund company does the same at the end of day when they calculate NAV (which is when they do new investments and redemptions).

So that's one thing ...

The second thing (which is what people mainly worry about) is what can go wrong in terms of volatility(*) and piggybacking. During a bubble, the index may end up being driven by just a few high-profile stocks during a stock market bubble which end up representing a large fraction of the index. Indexers being ignorant of what they buy will keep driving them up because they are now big. This is a positive feedback process.

(*) This is a problem even if you're not selling yourself because the fund is still selling (due to all the other guys selling). Therefore tracking-error would increase and the fund would lose money. Think of that as an extra fee.

People who buy the index then overpay for those few issues. If the market crashes, then those overvalued issues will crash far harder than the rest of the market and drive the index down as much as they previously drove it up. Meanwhile, those who stayed out or timed correctly will see their portfolio drop less than the index. After it all blows over, the indexer will still own pets.com but it'll be worth almost nothing. The dotcom crash provides an instructive example. See NDAQ between 1995 and now and how long it took an investor in the NDAQ to come back after buying in in 2000.
Seppia wrote:
Tue Jun 20, 2017 9:49 am
I'm looking for reasons why, as it would be awesome to be among the 1% that more or less saw it coming.
I'm curious as to why you think that would be awesome?

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by Riggerjack »

Not really. I'm not even sure it is "proven" that Index funds broadly affect stock prices in a way such that it can be quantified. Consider a US total market fund with holdings in proportion to market cap. Hypothetically if such a fund held 1% of the entire US market, it would hold 1% of all APL shares outstanding, and continue all the way down to holding 1% of the smallest company's outstanding shares (even though the dollars are vastly different). If the fund grew to 2% of the total market it would add an additional 1% of outstanding shares of every company, large or small. Intuitively, whatever affect that fund has on the market should be proportionally the same on every stock in the index (in this example virtually every actively traded stock in the country). With the gradual trend towards total market indices versus SP500 indices, as well as the plethora of small and mid-cap index fund and ETF options that have arisen since the first SP500 index, it makes sense that money in index funds should begin to approach a distribution by cap weight that parallels the actual cap weight distribution of the market. Perfect alignment with the cap weight distribution of the market is inevitable If one believes that indexes are The Borg destined to devour the entire market.
I like index funds, and am currently invested in a few. But what concerns me is the blind adjustments. In the example above, the higher the index fund ownership, the greater the volatility caused by the blind adjustments.

At some point, the few individual investors will be able to swing prices, simply by forcing indexes to adjust. After all, even the biggest stocks have limited liquidity. Forcing a change in price, causing a buy/sell reaction from index funds that exceeds the capacity of the market to provide counterparties, would be extremely profitable.

Yes, it is illegal, but if you can't think of a way to separate action from consequences, you are probably working as a watchdog for the SEC.

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Seppia
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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by Seppia »

Thanks a lot Jacob for the detailed response.
jacob wrote:
Tue Jun 20, 2017 4:11 pm
During a bubble, the index may end up being driven by just a few high-profile stocks during a stock market bubble which end up representing a large fraction of the index. Indexers being ignorant of what they buy will keep driving them up because they are now big. This is a positive feedback process.
I think this is evident in the us market, which is why I own zero us market indexes (I live in Europe).
Still, I thought it was evident also two years ago, and it kept going up. I was lucky I was living in the USA at the time so I was less underweight usa than I am now, but as they say
The market can stay irrational longer than you can stay solvent
Which is why I try (with some rules) to be 50% robotic and 50% active with my investments.
I try be rational, but high valuations can go higher and low valuations can go lower
To me, having a 50% automated and 50% active (relatively active, I mostly buy, and almost never sell, since I'm generating cash suprpluses with my salary) approach is another way of hedging risk.
So far I've had better returns with my active vs my passive investments, but I've known index funds for only 5 years* and the timeframe is too short for me to draw definitive conclusions.
For example in my period in the USA (Jan 2011 - dec 2015) I've outperformed the market, but was it because I was a genious buying a lot of Amazon stock at $280 on average and some vgenx (Vanguard energy index fund) throughout the energy collapse, or was I just lucky?
I don't know, yet.
I since proceeded to slowly sell all my Amazon stock at $550 on average.
Looked like a genious at the time, looking like an idiot now.

*ivw been investing since 2006 but at the time in Europe index funds were unknown, at least to 26 year old me.
jacob wrote:
Tue Jun 20, 2017 4:11 pm
People who buy the index then overpay for those few issues. If the market crashes, then those overvalued issues will crash far harder than the rest of the market and drive the index down as much as they previously drove it up.
Agree. This is another thing I see in common with all bubbles.
How do they say? "What shoots high the fastest crashes down the loudest"?
jacob wrote:
Tue Jun 20, 2017 4:11 pm
Seppia wrote:
Tue Jun 20, 2017 9:49 am
I'm looking for reasons why, as it would be awesome to be among the 1% that more or less saw it coming.
I'm curious as to why you think that would be awesome?
Because you can plan accordingly.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by IlliniDave »

jacob wrote:
Tue Jun 20, 2017 4:11 pm

People who buy the index then overpay for those few issues. If the market crashes, then those overvalued issues will crash far harder than the rest of the market and drive the index down as much as they previously drove it up. Meanwhile, those who stayed out or timed correctly will see their portfolio drop less than the index. After it all blows over, the indexer will still own pets.com but it'll be worth almost nothing. The dotcom crash provides an instructive example. See NDAQ between 1995 and now and how long it took an investor in the NDAQ to come back after buying in in 2000.
People buy index funds as a vehicle to own stocks. If there were no index funds most of the money would be going into non-index mutual funds which, rather than spreading money over the entire spectrum of stocks, would tend to concentrate it even more in the "hot" ones. Index fund buyers don't put any more upward pressure on "overpriced" stocks than they do any other stock, so the ones who are really driving a stock price up relative and in disproportion to the market are the non-index investors. It's funny you mention the dot.com crash because index investors were at least diversified away from tech stocks so were spared a good degree of the carnage the owners of shares in the tech funds and many individual portfolios went through. It certainly was not index funds that drove the dot.com bubble, although to agree we shared in the pain. What you said about pets.com is true, whenever you are highly diversified you'll own some lemons.

If a guy could systematically pick just the big winners and avoid the losers that would be great, you'd get staggeringly wealthy very quickly.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by Dragline »

I listened to the podcast, too. Ritzholtz has also had guests on that have said this is not a problem, given the overall makeup of the market with institutional investors dominating and index funds still comprising only 1/3 of the market.

I honestly don't know if its a problem. It could certainly be a problem for illiquid and leveraged funds. You would see these blow up first, like the leveraged funds in mortgaged backed securities began to blow up in late 2007/early 2008.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by bryan »

@IlliniDave, I'm not so sure. When a company is added/removed from an index there is usually some significant movement of that stock in the couple months before/after.

I haven't really looked at the methodologies of the S&P or other indexes in detail, but it's a fact one index methodology will outperform another's depending on how you measure performance. I'm not convinced, going-forward, that index methodologies will provide the best performance (after fees are accounted for, obviously). One thing that may save indexes is the gravity of capital.

I suspect the winning formula for the next downturn will be one in which you don't own the big indexes (DJIA, S&P). I say it because 1) these companies' stock price making up the index are attracting disproportionate amounts of money and thus will be the biggest to fall and 2) diversification evaporates (things get correlated) most during a downturn, indexed stocks especially.

Sure the S&P is diverse on the surface, but the stocks that make it up will be extremely correlated if we see a dramatic market loss; exactly when you would want diversification to help you. I suspect there will be some stocks outside of the biggest indexes that won't be as affected? VTWO/VFINX/DIA are not the total stock market, they are just low-fee dumb funds (that are advertised as representing the total stock market and economy) without managers making decisions about what is in the fund (now the index managers get to do that). Index funds are more forgiving than, say, a Berkshire or Berkowitz.

We will see if Efficient Markets will save indexers during a downturn, or if all the arbitragers/hedgers have already lost their shirts and don't have the fuel/motivation to keep markets as efficient going forward. I think there is a Keynes quote about this.

Of course I thought this thread wasn't a question of (all the) underlying stocks blowing up, but specific ETFs or MUTFs having some crazy tracking errors or something like that.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by ThisDinosaur »

Vanguard's prospectus states that it holds a "sampling" of the stocks in the index (i.e. CRSPR Total Stock Market). There is no indication that you don't own the actual stocks in question, albeit indirectly.
Principal Investment Strategies
The Fund employs an indexing investment approach designed to track the
performance of the CRSP US Total Market Index, which represents approximately
100% of the investable U.S. stock market and includes large-, mid-, small-, and
micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The
Fund invests by sampling the Index, meaning that it holds a broadly diversified
collection of securities that, in the aggregate, approximates the full Index in terms of
key characteristics. These key characteristics include industry weightings and
market capitalization, as well as certain financial measures, such as price/earnings
ratio and dividend yield.
To me, this says vanguard investors do in fact own the stocks listed in the index (just not *all* of them), and that Tracking Error is due mostly to the few stocks outside of their sampling. I'm having a hard time squaring this with Jacob's assertion that Tracking Error is due to Vanguard's ability to match their short VTSMX and their long basket. Can some one explain this like I'm five?

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by bryan »

Well one can imagine that it is very inefficient (expensive) to own/trade underlying stocks too often, especially if you have high quality information into your clients' buying/selling habits, that you have some hold on the clients' assets (you have some delay before client can remove them), and they tell you (either directly through tools you provide them or the raw data available to you) retirement and savings plans like a Vanguard does. They should be able to do a good job of predicting demand of certain securities and make efficient trades based on their own projections. Obviously it would be hugely risky to not own a lot of the underlying stock, but obviously Vanguard does own a lot of the underlying stock as you can tell by looking at a companies "Top Institutional Holders" or similar. The question could be how much do we think Vanguard should hold if they had to own 100% stocks of index versus how much they actually hold and can we make any money from that finding (or has the efficient market already fixed the problem for Vanguard)?

The above loops back to the question in the other thread, if there are risks of going w/ a Vanguard Fund/Brokerage versus something/someone else.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by 7Wannabe5 »

If I try to think about this problem being analogous to Farmer's Market vs. CSA, I think the fault line will likely develop between public-traded vs. private-held means/tools of production. Like if somebody made a drive-up window hut next to the road by the busy, popular Farmer's Market, where it was a boon to be a farmer who had a spot, and on top of the drive-up hut was a sign that said Easy n' Fresh: Get This Week's Harvest Fast! (Guaranteed to be balanced mix of produce available in the market), and this service became so popular the farmer's who had scored tables at the market could count on 30% of everything they brought being purchased by this vendor for mixed basket production. Then I asked myself what would serve the self-interest of the farmer's who had booths, and my answer was that they would tend towards limiting or veering their business towards mainly functioning as part of distribution network rather than engaging in direct production.

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Re: Actual ways in which a large Index Fund / ETF could "blow up"

Post by bryan »

7Wannabe5 wrote:
Wed Jun 21, 2017 1:20 pm
I think the fault line will likely develop between public-traded vs. private-held means/tools of production.
Raising capital in this day and age of low interest rates and a shrinking middle class (and especially the near future with "blockchain" securities) is pretty easy via private channels. Granted, public companies have been around a long time and are the most likely candidates for future mega-corps. But really, there isn't much difference between a public or private company, is there? Main thing being a middle class person can't easily buy shares of a private company, today? Having an IPO (and issuing new stock into the public markets) was a big part of why you want to go public, in addition to giving current owners access to more liquidity. Maybe being public is still attractive if you really need a lot of capital and think you can get into an index...

With that last sentence, I re-iterate my earlier point that index funds are just low-fee dumb funds. If you could greatly reduce the management/trading fees of non-index funds, all of a sudden index funds aren't an obvious choice. For some reason this fact escapes investors today even though it was obvious >7 years ago when index funds started taking off.

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