Hacker News Reader

Comment by jonknee | Hacker News Reader

Well they also have a significant share of invested funds ($5.3 trillion under management!), it would be really weird if they didn't have a significant share of many companies.

View on HN

I guess the risk is that if people withdrew funds in a recession/crisis, they would blanket-kill every company out there, even companies doing really well.

The good news is that tanking stocks don't actually hurt a company - except possibly if it's in dire and urgent need of more capital, but then the problem is that the company wasn't doing well to begin with.

As opposed to all the recessions/crises before indexing where stocks didn't go down? Sharp people will scoop up great names at a discount just like always.

Its not the same: someone unwinding broad positions could sell anti-cyclical stocks that did not fall too hard and keep the ones lowest.

Someone with index funds has no choice: has to dump the good and the bad.

Sure, which also happens every time there's a big down move in the market. Actually per prospect theory it is often the best performers that get sold first:

https://en.wikipedia.org/wiki/Disposition_effect

Regardless, my point is smart stock pickers will come in and bid up companies that get oversold. No damage done unless you tried to time the market in your IRA and sold at the bottom. People who continue automatic purchases of broad indexes will be happy (at some point!) for the discount.

There are plenty of value stock ETFs out there. You don't have to go with an index fund.

Nobody has to, but too many have, thats the whole point.

Value stock ETFs are index funds.

Many are index funds, but some are directly curated by the fund creator without mirroring any pre-existing index. Though they still function similarly to index funds in that they have low expense ratios, unlike traditional actively managed mutual funds with their exorbitant management fees.

> Someone with index funds has no choice: has to dump the good and the bad.

But they can be rebalancing instead of going to cash as well; Such as moving from SPY (S&P 500) to SPYD (S&P 500 dividend stocks)

Remember when that kid was calling on a Vanguard boycott because it was the largest holder of gun stocks?

Reply on news.ycombinator.com