As indexing grows, active stock pickers are underperforming the market by increasingly large margins, even as their skill improves. In this episode, we explore why this is happening and consider whether active managers can outperform again. Finally, we explain how to position your portfolio using index funds and ETFs without overweighting the S&P 500 Index. Topics covered include: Show Notes Episode slides Sharpening the Arithmetic of Active Management by Lasse Heje … [Read more...]
504: Indexing Bubble and Asset Class Returns Still Revert to the Mean
How asset class returns move in cycles with periods of above-average returns followed by periods of lower returns. How has the rise of passive indexing led to higher stock valuations, and what does that mean for markets? Show Notes The Equity Risk Premium: Nine Myths (JPM Series) by Rob Arnott—Research Affiliates The Greatest Scourge in Factorland: Revaluation Alpha = Fake Alpha (JPM Series) by Rob Arnott—Research Affiliates PASSIVE INVESTING AND THE RISE OF MEGA-FIRMS by Hao … [Read more...]
467: Unraveling the Truth About ETFs: Benefits, Analysis, and the Indexing Bubble Myth
How the ETF market is changing, why ETFs should be your preferred investment vehicle, and how to analyze ETFs to generate better investment performance. Topics covered include: Show Notes Global Fund Flows Dominated by Fixed-Income and ETFs—Morningstar It’s Official: Passive Funds Overtake Active Funds by Adam Sabban—Morningstar ETF Issuer League Tables—VettaFi Global ETF Market Facts: three things to know from Q3 2023 by Samara Cohen—iShares Rise of Passive … [Read more...]
390: Are BlackRock and Vanguard Too Big and Powerful?
How big index fund and ETF providers have increased their sway over publicly-traded companies while potentially discouraging competition. What can be done about it? Topics covered include: How market share for assets under management has become increasingly concentrated with big fund complexes like Vanguard and BlackRockWhat is a fiduciary relationship and how do asset managers serve as fiduciariesWhy do investors in index funds and ETFs have no input as to how fund sponsors vote on … [Read more...]
365: Why Some Asset Bubbles Don’t Burst
What conditions need to be in place for an asset bubble to continue and how that applies to stocks, cryptocurrency, and houses. Topics covered include: How to determine if there is an asset bubbleWhat are microbubbles and anti-bubblesHow the cannabis stock bubble burstWhat is required to sustain an asset bubbleHow the current runup in home prices differs from the housing bubble in the mid-2000sWhat structural changes have led to the high valuations for U.S. stocksWhat is the Great Wealth … [Read more...]
340: Climate Change, ESG, and What Should Investors Do?
How businesses, households, governments, asset managers, and investors interact in unpredictable ways to address the risks and opportunities related to climate change and other global trends. Why ESG investing goes beyond just buying an ESG fund or ETF. Topics covered include: Show Notes The Beauty of Everyday Things by Soetsu Yanagi (affiliate link) Darmstadt Definition of Sustainable Investments by Johannes Hoffmann, Gerhard Scherhorn, Timo Busch (eds.)—Wuppertal … [Read more...]
311: Did ETFs Pass the 2020 Market Collapse Stress Test?
How did ETFs function during the 2020 market sell-off and did the indexing bubble burst? which ETF structures failed the stress test and which passed? Topics covered include: Show Notes The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs by Reed Stevenson—Bloomberg ETF backers declare victory after ‘largest ever stress test’ by Robin Wigglesworth—Financial Times ETF growth is ‘in danger of devouring capitalism’ by Robin Wigglesworth—Financial … [Read more...]
234: Index But Don’t Herd
How and when to use passive indexing strategies without following the crowd. In this episode you’ll learn: How big is indexing and why has it taken so long to catch on.What areas has active management done well.What are ways we can index without following the crowd. Show Notes Jeffrey Gundlach says passive investing has reached a 'mania' – investors should avoid index funds - CNBC Passive investing continues to captivate global audience - Pension & … [Read more...]
198 Plus: Market Efficiency, Tracking Error and Securities Lending
This week March 30, 2018, we look at whether it is possible to get an "information interpretation edge" in terms of taking advantage of market participants overreacting to information that is publicly available. We also look at how indices are reconstituted, how index funds and ETFs track their underlying benchmarks, tracking error and securities lending. … [Read more...]
163: Is There An Indexing Bubble?
How an indexing bubble is manifest, why most active managers underperform and how individuals can structure their own quasi index fund that outperforms the market. In this episode you’ll learn: Show Notes The 25 Largest Mutual Funds and ETFs - MarketWatch The Makeup of the S&P 500 Is Constantly Changing - Business Insider article with quote by Adam Parker of Morgan Stanley Fund managers rarely outperform the market for long - The Economist - Manager study by Dow … [Read more...]
