Don't buy index trackers.........for my sake

TheTracker

Thrugelmir wrote: »

Makes you wonder why Investment Houses spend all that money researching companies.

I'm an avowed, but not heavily evangelical, passive investor. But it doesn't make me wonder why investment houses spend loads of money researching companies. It let's the manager know which ones to invest in! I'm glad they do spend this money on research. It's a popular but false assumption that passive investors feel that investment fund managers are rolling dice. Far from it! The argument is not that the aforementioned research yields no absolute value, it's that it lends little relative value (different between fund managers), and that such relative value is drowned by natural volatility and is terribly difficult to discover ahead of time. So what's fabulous is that I don't need to pay for the managers to pay for this research - you, the active investor, pays for it - and I can surf your coat tails for free in terms of research.

username12345678

TheTracker wrote: »

So what's fabulous is that I don't need to pay for the managers to pay for this research - you, the active investor, pays for it - and I can surf your coat tails for free in terms of research.

Which is one of the reasons an industry insider described passive investing as 'worse than marxism'.

Drp8713

Active investing is a noble sport. It's better to have tried to beat the market, and failed. Than to have never tried to beat the market at all.

I'm sure passive investors wake up in the morning with their average looking wife and their average paying job, content in their life of averageness.

However, some people aspire for more. I have a better than average looking wife, a better than average paying job, fingers crossed on the investment front.

Pincher

It's the good old every shop becomes a shoe shop scenario.
From Hitch Hiker's Guide.

It's a self-propelling snow ball. The index funds would buy AAA, BBB and CCC because they are part of the index, not because they are decent companies that pay better dividend or grow more. Every time they buy more, and hold, the share price edges up. Investors see the rise, and put more money in trackers. The index trackers have no choice, so they buy more of the same thing, pushing share prices ever higher. In a rational world, investor money eventually dries up, so the upward movement stalls. Seeing low dividend returns, and no further capital gains, people will start withdrawing their money, driving the price down. An avalanche of a price crash.

On the way up, because every one is switching their money from active to passive, it means every fund that isn't passive will collapse, so they all become index trackers.

The frightening thing is, what if governments are too terrified of the crash, and intervene somehow? Print more money, and BUY the over priced shares? I think I should start stockpiling gold after all.

Pincher

Drp8713 wrote: »

However, some people aspire for more. I have a better than average looking wife, a better than average paying job, fingers crossed on the investment front.

But she just slaps my hand away, like in Israel, and wants to sleep in a separate city. :rotfl:

Ray_Singh-Blue

Drp8713 wrote: »

. I have a better than average looking wife, a better than average paying job, fingers crossed on the investment front.

Ah but if you have a better paying job, you can have a better paying investment fund. 10 units of an index tracker will pay twice as much as 5 units. So no need to cross your longer-than-average fingers.

As for the good looking wife thing, maybe Jimmy Soul said it best in 1963:

If you want to be happy for the rest of your life
Never make a pretty woman your wife
So for my personal point of view
Get an ugly girl to marry you

A pretty woman makes her husband look small
And very often causes his downfall
As soon as he married her and then she starts
To do the things that will break his heart

But if you make an ugly woman your wife
A-you'll be happy for the rest of your life
An ug-a-ly woman cooks meals on time
And she'll always give you peace of mind

Don't let your friends say you have no taste
Go ahead and marry anyway
Though her face is ugly, her eyes don't match
Take it from me, she's a better catch

bostonerimus

Drp8713 wrote: »

Active investing is a noble sport. It's better to have tried to beat the market, and failed. Than to have never tried to beat the market at all.

I'm sure passive investors wake up in the morning with their average looking wife and their average paying job, content in their life of averageness.

However, some people aspire for more. I have a better than average looking wife, a better than average paying job, fingers crossed on the investment front.

We can come up with metrics for investment performance and pay, but I wouldn't want to even attempt it for beauty. I'm glad you want better than average investment returns. Your optimism is vital to indexers.

Apodemus

Theoretical question, then... if your granny bought shares (for sake of argument let's say in Unilever or Shell, rather than ICI and Burmah!) in 1957 and has held them for 60 years, quietly collecting the dividends and never even considering the share price or thinking about selling...

Are we saying she is an active investor?

bigadaj

The other difficulty is using vanguard as shorthand for passive investing.

I'm sure I heard a few years ago they actually held more money in active funds than passives, current browsing suggests it's currently between a quarter and third of assets under management.

BLB53

Active investing is a noble sport. It's better to have tried to beat the market, and failed. Than to have never tried to beat the market at all.

I'm sure passive investors wake up in the morning with their average looking wife and their average paying job, content in their life of averageness.

However, some people aspire for more. I have a better than average looking wife, a better than average paying job, fingers crossed on the investment front.

Most fund managers and small investors fail to beat the market average so I suppose its ironoic that passive index investors get a better than average outcome!