Index But Don't Herd
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 19 December 2018
⏱️ 32 minutes
🧾️ Download transcript
Summary
#234 How and when to use passive indexing strategies without following the crowd. Thanks to Masterworks and Sleep Number for sponsoring the episode.
For show notes and more information on this episode click here.
- [2:25] Do all index investment followers herd?
- [4:13] Why it has taken so long for indexing to become established.
- [11:05] Comparing the statistic of active management to passive management.
- [16:14] Keeping your portfolio diverse while indexing.
- [19:54] Example of a return driver outside of indexing.
- [24:54] Steps to take to keep from following the herd.
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Transcript
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| 0:00.0 | Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it and how to live without worrying about it. |
| 0:10.5 | I'm your host, David Stein. today is episode 234. It's titled Index, but don't |
| 0:17.0 | heard. |
| 0:18.0 | Yesterday Jeffrey Gunlach, founder of Double on Capital, said on CNBC, quote, I'm not at all a fan of passive investing. |
| 0:29.0 | In fact, I think passive investing in |
| 0:39.0 | and robo-advisors are going to |
| 0:34.1 | the peak of the global stock market. |
| 0:36.0 | I think in fact that passive investing and robo-advisors are |
| 0:40.0 | going to exacerbate problems in the market because it's hurting behavior. |
| 0:46.7 | I wouldn't advise anyone to be a passive investor. |
| 0:51.4 | Gunlach said, my strongest advice is to not invest in passive U.S. equity funds. |
| 1:00.0 | Gunlach's words were strong enough that Vanguard felt like they needed to issue a statement to |
| 1:07.1 | CMVC. |
| 1:08.5 | Vanguard, one of the largest, if not the largest, investment firm in the world primarily build on index funds. |
| 1:17.0 | Their statement says, while Mr. Gunlach may enjoy pointing fingers, |
| 1:22.0 | the data simply does not support his claims. Index funds own a modest |
| 1:27.7 | 15% of the value of all global equities, and the strategy accounts for less than 5% of the exchange's total trading volume. |
| 1:38.5 | In June, Pension and Investments issued some data showing that as of June 30 |
| 1:45.0 | 6.42 trillion dollars of US stocks were passively managed |
| 1:51.0 | a 16% increase from the previous year. |
| 1:56.0 | And looking at the overall size of the U.S. stock market as measured by the market capitalization of the Wilshire 5000, that $6.42 trillion represents about 24% of the |
| 2:10.6 | U.S. stock market. |
... |
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