> Passive capitalization-weighted index funds now surpass active management in aggregate investor allocations. Flows into passive strategies cause unrelated stocks to move synchronously, undermining diversification and potentially increasing systemic risk. New flows into passive products mechanically overweight overvalued stocks and underweight undervalued stocks due to market-price weighting, exacerbating momentum-driven price distortions. Rebalancing at the stock level to non-price-based anchor weights may mitigate these distortions and enhance long-term returns.
This is likely why large-cap stocks have outperformed over past decade.
The shift to passive capitalization-weighted indexes may be making it easier for active investors to make money. The massive ballast of passive capital that has predictable reactive behavior provides a small degree of leverage.
It's an irrelevant point because ETFs incorporate more than just US stocks. You have global stocks (tens of thousands), options (a million expirations), bonds (3 million cusips) , crypto, futures, and the list goes on. And it becomes a combinatorial exercise...
The article is pointing out the lack of publicly listed companies in the USA. But we also have private stock in ETFs now. And not to mention a handful of blockbuster IPOs on the horizon, like SPCX.
Yeah, ETF is a function of strategy, asset, financing methods and many other things. Varying leverage alone can multiply one ETF into 3 or 4. Other than showing that there's more risk in a collapse than just the single security I'm not sure what I'd do with this information.
That still tells you information that could be useful or important - That there is a lot of demand for these playlist things. People must be using them opposed to individual songs or albums.
I hope to god "investors" don't fall for the "blockbuster" IPO of SPCX.
Remember in 2008 when Standard and Poors was giving AAA ratings to junk CDOs at the investment banks behest?
SPCX isn't going to collapse the global financial markets, but the exact same shady rules changes and suspect IPO structure reeks of banks trying to pull the wool over retail's eyes.
> I hope to god "investors" don't fall for the "blockbuster" IPO of SPCX.
Elon would never leave that to chance, he made sure it doesn't matter if investors "fall" for it or not by bullying the indexes into suspending their 1-year rules specifically to get SPCX (and everyone's 401k) bought in within 15 days. If you use indexes you're buying SPCX right out of the gate whether you like it or not.
Fidelity offers something called Fidelity Zero funds which are pretty cool because there is 0% expense ratio. You only want to use them in a tax advantaged account in case you want to move away from Fidelity, other brokerages can't transfer them so you'd have to sell and incur capital gains, unless it's in a tax advantaged account.
FNILX(S&P500) FZIPX(US Mid and Small) FZROX(Total US) and FZILX(International)
It's the ultimate realization of the Bogleheads strategy.
Isn't that like saying there are more blog posts written than books.
Sure they are similar in that they are collections of words, but the significance of the total is not the count of how many there are, but rather their sum worth.
Question! Is there a counterparty risk with ETFs versus owning the equivalent fund that owns the same underlying stocks? (Assuming there is an ETF and fund that are approximately equivalent.) I trade about once a year, so there's no real benefit to me with ETFs, and I've always preferred funds.
ETFs are supposed to hold the underlying asset, just like mutual funds. In the worst case, you are due your share of the underlying asset.
ETNs (which are sometimes lumped with ETFs but are actually distinct products) have counterparty risk since they aren't required to hold the underlying asset. They are unsecured debt securities issued by a bank.
There are precious metal ETFs that are. Distinct from the "physical" gold funds in that they use derivatives to match the price action of the precious metal instead of buying and storing it
yes, there is counterparty risk with both etfs and mutual funds. in general, stick to the well regarded issuers or fund managers. vanguard is the best imo, they do a lot to protect their shareholders.
Well duh, there are more ways to create subsets of a set than there are elements in that set. I guess it's just noteworthy that there are enough of those subsets that are worth listing as their own ETF.
I wonder when/where that started. My girlfriend's kid and her friends have been using the word slop for at least the last 5 years to refer to fast food.
i mean, ive heard to for fast food and stuff before.
but someone said "ai slop" once, and now apparently slop is the only term people can think of to describe literally anything of low quality or anything they dont like.
ETF slop. microslop. slop article. self-reinforcing slop. word slop. slop-powered craft. slop-cannon. vibe spaghetti slop. tools slop. llm slop. slop site. slop factories. slop induced tech debt. slop submissions. slop content. intense slop. one-shot slop. slop art. "slop out a blog post about it". slop rewrite. spam-slop. load-bearing slop.
(those are all from the last ~8 hours on this site alone)
there is a bit of irony in the fact that the anti-ai crowd harps on overuse of "not X, but Y" and em-dashes, yet they all use the exact same adjective a half dozen times in every ai-related comment. maybe ai will start overusing the word slop and things will self-correct.
wow you got me, i forgot how zeitgeist is used to describe every single thing people don’t like now adays.
how could i have been so stupid not to see the identical frequency of use between "X slop" and "zeitgeist".
(zeitgeist is in 19 comments this week, we're 3 of them. slop is in 775 comments. most comments containing slop once contain it multiple times, so ~1500+ times)
It is interesting and probably bad, however the problem is in practice exaggerated. That is because there are a long tail of ETFs with basically no AUM which get included.
Slicing at $1B AUM gets you down to about 1500 ETFs, and $10B AUM down to 350.
Avoid leveraged, inverse, active, and small ETFs as an investor and you'll be fine.
Apollo makes most of their money in private markets so they are happy to post public market FUD.
The number of ETFs isn't as relevant as the total % of funds invested in passive funds as opposed to single stocks or active funds.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5259427
> Passive capitalization-weighted index funds now surpass active management in aggregate investor allocations. Flows into passive strategies cause unrelated stocks to move synchronously, undermining diversification and potentially increasing systemic risk. New flows into passive products mechanically overweight overvalued stocks and underweight undervalued stocks due to market-price weighting, exacerbating momentum-driven price distortions. Rebalancing at the stock level to non-price-based anchor weights may mitigate these distortions and enhance long-term returns.
This is likely why large-cap stocks have outperformed over past decade.
The shift to passive capitalization-weighted indexes may be making it easier for active investors to make money. The massive ballast of passive capital that has predictable reactive behavior provides a small degree of leverage.
100%. i ran a trading desk predicated on this strategy, and know a couple of others who are still successfully running similar strats.
It's an irrelevant point because ETFs incorporate more than just US stocks. You have global stocks (tens of thousands), options (a million expirations), bonds (3 million cusips) , crypto, futures, and the list goes on. And it becomes a combinatorial exercise...
The article is pointing out the lack of publicly listed companies in the USA. But we also have private stock in ETFs now. And not to mention a handful of blockbuster IPOs on the horizon, like SPCX.
Yeah, ETF is a function of strategy, asset, financing methods and many other things. Varying leverage alone can multiply one ETF into 3 or 4. Other than showing that there's more risk in a collapse than just the single security I'm not sure what I'd do with this information.
It also just seems like a bizarre thing to care about.
"There are more user playlists on Spotify than songs!"
Well yeah, of course there are?
Breaking news: Number of potential combinations of set elements rumored to _far exceeds_ the cardinality of said set! Populace baffled!
That still tells you information that could be useful or important - That there is a lot of demand for these playlist things. People must be using them opposed to individual songs or albums.
I hope to god "investors" don't fall for the "blockbuster" IPO of SPCX.
Remember in 2008 when Standard and Poors was giving AAA ratings to junk CDOs at the investment banks behest?
SPCX isn't going to collapse the global financial markets, but the exact same shady rules changes and suspect IPO structure reeks of banks trying to pull the wool over retail's eyes.
TSLA was a $60bn company when Musk made his equity milestone deal in 2018. He had a 10 year horizon to 10x TSLA to $650bn. He did it in 2.
SPCX is maybe $1.25tr now - and he has a similar equity milestone deal to just 5x to $7.5tr. Its a big number. For comparison, NVDA is already $5.2tr+
So my guess is people will assume any investment in SPCX will be a 5x return in a short period of time.
Also a company this large will get swept into many indexes, including the S&P500 - so most investors will own it by default.
It would be more impressive if Tesla was actually growing...
> I hope to god "investors" don't fall for the "blockbuster" IPO of SPCX.
Elon would never leave that to chance, he made sure it doesn't matter if investors "fall" for it or not by bullying the indexes into suspending their 1-year rules specifically to get SPCX (and everyone's 401k) bought in within 15 days. If you use indexes you're buying SPCX right out of the gate whether you like it or not.
> bullying the indexes
Bullying with a fat check, yeah. Corruption in this country is off the charts right now.
Fidelity offers something called Fidelity Zero funds which are pretty cool because there is 0% expense ratio. You only want to use them in a tax advantaged account in case you want to move away from Fidelity, other brokerages can't transfer them so you'd have to sell and incur capital gains, unless it's in a tax advantaged account.
FNILX(S&P500) FZIPX(US Mid and Small) FZROX(Total US) and FZILX(International)
It's the ultimate realization of the Bogleheads strategy.
Isn't that like saying there are more blog posts written than books.
Sure they are similar in that they are collections of words, but the significance of the total is not the count of how many there are, but rather their sum worth.
I'm surprised they don't dwarf them by orders of magnitude.
You can make arbitrarily random ETFs with all kinds of weird positions. Crypto, bonds, derivatives of all kinds, international stuff.
Plus you can give them funny names like $NANC.
Question! Is there a counterparty risk with ETFs versus owning the equivalent fund that owns the same underlying stocks? (Assuming there is an ETF and fund that are approximately equivalent.) I trade about once a year, so there's no real benefit to me with ETFs, and I've always preferred funds.
ETFs are supposed to hold the underlying asset, just like mutual funds. In the worst case, you are due your share of the underlying asset.
ETNs (which are sometimes lumped with ETFs but are actually distinct products) have counterparty risk since they aren't required to hold the underlying asset. They are unsecured debt securities issued by a bank.
There are precious metal ETFs that are. Distinct from the "physical" gold funds in that they use derivatives to match the price action of the precious metal instead of buying and storing it
yes, there is counterparty risk with both etfs and mutual funds. in general, stick to the well regarded issuers or fund managers. vanguard is the best imo, they do a lot to protect their shareholders.
Well duh, there are more ways to create subsets of a set than there are elements in that set. I guess it's just noteworthy that there are enough of those subsets that are worth listing as their own ETF.
Also worth your consideration:
The Rise of ETF Slop - Ben Felix https://www.youtube.com/watch?v=14V7q4gHKFo
i cannot wait for the word "slop" to leave the zeitgeist.
I wonder when/where that started. My girlfriend's kid and her friends have been using the word slop for at least the last 5 years to refer to fast food.
i mean, ive heard to for fast food and stuff before.
but someone said "ai slop" once, and now apparently slop is the only term people can think of to describe literally anything of low quality or anything they dont like.
ETF slop. microslop. slop article. self-reinforcing slop. word slop. slop-powered craft. slop-cannon. vibe spaghetti slop. tools slop. llm slop. slop site. slop factories. slop induced tech debt. slop submissions. slop content. intense slop. one-shot slop. slop art. "slop out a blog post about it". slop rewrite. spam-slop. load-bearing slop.
(those are all from the last ~8 hours on this site alone)
there is a bit of irony in the fact that the anti-ai crowd harps on overuse of "not X, but Y" and em-dashes, yet they all use the exact same adjective a half dozen times in every ai-related comment. maybe ai will start overusing the word slop and things will self-correct.
So, like "spam".
Theyre both things we consume.
Well not me, but NPCs.
> Well not me, but NPCs.
I felt personally attacked by your comment, and would spitefully lookup your behavior tree and show it to you... if my behavior tree allowed that.
I have a feeling "slop" is the new "spam" (etymologically) -- it could be with us for decades.
be careful what you wish for, there's always some new awful thing to replace the old awful things
i cannot wait for the word zeitgeist to leave the zeitgeist.
wow you got me, i forgot how zeitgeist is used to describe every single thing people don’t like now adays.
how could i have been so stupid not to see the identical frequency of use between "X slop" and "zeitgeist".
(zeitgeist is in 19 comments this week, we're 3 of them. slop is in 775 comments. most comments containing slop once contain it multiple times, so ~1500+ times)
It is interesting and probably bad, however the problem is in practice exaggerated. That is because there are a long tail of ETFs with basically no AUM which get included.
Slicing at $1B AUM gets you down to about 1500 ETFs, and $10B AUM down to 350.
Avoid leveraged, inverse, active, and small ETFs as an investor and you'll be fine.
Apollo makes most of their money in private markets so they are happy to post public market FUD.