RIP, Jack. You changed the game and allowed the little guy to succeed in investing. Thank you for everything you did to make the game fair. I have taught these lessons to my children.
You seem confused. The problem with the financial markets is that the investing companies take their share first. Index funds trim that bridge considerably.
Yeah, he said that - I think he misspoke - I think he meant mutual funds and their fund managers. With index funds, you can see how much you're paying if there's a delta between your fund and the index it's built to emulate (S&P 500 for example). With a mutual fund, you really don't know what they're taking, but you can bet it's a lot.
Jack Bogle, a true American Hero.... His innovation of index funds/low cost, give the Average Working Class American access to the productivity of the Capitalist System...Don't just be another hypnotized consumer(or Complainer)... Be an OWNER of the means of production.
The return on these things are shit. I'll stick to real estate. Hell, I have a better return on investment at the casino, which by the way is funded by my passive income in REAL ESTATE. The "average working class American" is a sucker.
Franky Baby .. Good that you found your specific areas of expertise.... Diversification (including RIETs and Real Estate Indexed fund) is a safer bet for the average guy.. Also over a 30 year stretch MOST people Will Lose to the casino... It could be no other way, the casino must make it's cut.
While I agree that the advent of low cost index investing opened the door to far more people than before it existed, low wages are still a massive barrier to saving/investing for low income workers. Wages in America need to catch up with productivity and profits and then the entry level worker will also be able to participate in the indexing boom.
+Franky I couldn't disagree with you more. Why is it that every time I see a comment from a real estate investor crapping all over index investing, they sound like an angry zealot? The idea the real estate is the only asset class where one can make good money is absurd and wrong. My own success with index investing is all the evidence I need. Real estate is the smallest asset class allocation in my portfolio because, while it is a necessary component due to its non-correlation to the broader market, real estate speculators and overly exuberant buyers create real estate bubbles that frequently overvalue that market, which leads to the bubble/burst cycles we constantly see in that market. Yes, there is some of that in the broader stock market for sure, but the overall stock market is far more diversified than real estate alone and, therefore, can generate excellent returns if you choose the right mix of index funds, and it has the added benefit of reducing the investor's overall risk.
He didn’t debunk anything. He also didn’t give an answer to the criticism she brought forward. The criticism was about poor capital allocation. Consider this, indexing is diversifying into every possible failure as well as success. Debunking implies you provide empirical evidence. Jack didn’t answer the question nor give his objective opinion, he muscled his way out. Looks like she wasn’t impressed with the response or doesn’t know better. Not saying indexing is bad, or wrong. However I’ve seen a lot of objective, misleading data brought forward to sell TIF’s. Indexing is a product and Jack is a business man, selling his product. Remember that.
Jack is a very old man but if you truly watch he has a sharpe intellect and young spirit about him. Gotta appreciate people like this. How do they stay so young and engaged?
I absolutely agree! I just watched an interview with him and within the first minute of the interview, granted I had never heard him speak before, I could immediately tell how sharp and well spoken he was for his age, which was quite impressive!
I think the best thing to remember from this interview is that Index Funds are great for investors; especially people who have no time to follow individual stocks
@@bighands69 You are suffering from over confidence bias, beating the index is harder then winning Olympics, and if you cant beat the index then you are wasting time and money buying individual stocks.
actually even for people who have time and/or the inclination to follow individual stocks, cos even the so-called best fund managers get beaten by the index...blessings
>"Vanguard Group founder **addresses pros and cons** of index funds". FTFY. late in the video he does respond to some criticism of index funds e.g. cap-weighting
S Avgoulis...all you need to do is when the market drops buy the s&p and soon after it going to recover at some point, it’s a way of stamping on your emotions “it takes balls” buy every month buy and hold no matter what soon you get to the point where you start not caring and you just go with it!!
Not a poorly titled video at all. If you listen to Mr. Bogle he explains exactly what the "problem" is with index funds. The problem, if you will, is that all the darn money goes to the investors to quote Mr. Bogle.
They can weasel out of it with semantics easily and justify the title. A big problem with index funds is they are under-owned, according to Bogle. But Bogle also mentions here that the passive investing style suited to owning index funds has been perverted by those who trade them too often now. So that is a problem -- they are "over-traded" when they should be held long term. So, the problem with index funds is clear according to Bogle -- they are under-owned and over-traded.
They can weasel out of it with semantics easily and justify the title. A big problem with index funds is they are under-owned, according to Bogle. But Bogle also mentions here that the passive investing style suited to owning index funds has been perverted by those who trade them too often now. So that is a problem -- they are "over-traded" when they should be held long term. So, the problem with index funds is clear according to Bogle -- they are under-owned and over-traded.
This also explains why the Vanguard Group has removed its flagship 500 Index fund (VINIX) from its employees’ 401(k) plan. Not enough fees for Vanguard and too much return for the employees.
The last question about index funds being market cap weighted is not the question needed to be asked. What she should have asked Bogle is at what level of trading would passive index funds cause price discovery not to occur at the individual company level? Passive investing is currently viable as it relies on active management to create efficient markets. If everyone switched to passive investing, the underlying composition of the index would never change. There most be a level of active trading needing to have an efficient market that promotes price discovery that passive investing can depend on.
I remember watching her in 2006. She have someone on who said the real estate bubble was going to pop. She and her friends would openly laugh at them. Remember where Maria makes her money.
He passed away about 7 mos after this video in Jan. 2019 - to the right of the views, is Jun 8, 2018 the upload date? I suppose this may have been taped much earlier. Curious if anyone knows when the clip is from.
Johns one of the great innovators, who really did it for the average person. However, he failed to answer the question at the end- indexation by definition does not allocate capital in the most efficient way because it cares less what a particular company is doing and just buys everything. I anticipate that when indexation goes from 45% to 80% of assets invested in stocks that there will be incredibly inefficiency that even subpar active managers could take advantage of. It’s simple: indexation only works if there are thousands of savvy active investors making the market efficient by buying cheap and selling expensive. If they were not doing that, there could not be indexation. Remember any investment vehicle that gets the type of love ETFs are getting, are likely to get into bubble territory unless people start thinking critically again.
Andy Fazliu could you elaborate more on this? I’m not very finance savvy so I don’t understand why indexation would fail if there weren’t enough active investors
1:58 They're Generated by workers... The whole reason it works is because an employee is agreeing to give up a portion of their labor value to a business with a pre-existing framework that facilitates an employee's ability to generate value. That Capitalist structure isn't inherently good or bad, the morality of it comes from the value share an employee receives for their labor, and the conditions in which they must exist to generate that value.
Well, I'm totally with index investing and I personally put over 60% of my investment in the sp500 index fund managed by Vanguard. The problem that Jack didn't really answer is, what happens to price allocation beyond the major companies currently being indexed. There are over 7000 securities listed in the US stock market, and we are saying the largest, perhapes the most well performing few hundreds of them represent the entire market? For every dollar invested in index fund, a dollar is lost in the market in other places. Walmart started as a small store in Alaska, Amazon was nothing but a book selling site 10 years ago. What we see as large, or mega caps nowadays all started as a small cap. I would argue that these companies become what they are today was because there were no index funds back in the days, when some investors actually look at the company they are betting their money on and not just buy them because they were included in a basket of stocks called "index". So, is indexing distording price discovery of mid or small cap? Or, how much of a problem will it become should be the problem waited to be answered. If Amazon were to start over but 10 years later, it may never be successful because it will not attract enough investments as a small cap and not part of an index. But we may end up with another company just like Amazon today but were much larger at the time, say Walmart Online, it may just earn the same amount of return for investors anyway. I guess only time will tell.
There will always be active investors, and you only need a very small number of active investors to ensure that the money gets distributed to where it needs to go. If an S&P500 company is overprice, some portion of active investors will sell it and invest into some startup or something that needs the money more. Also when you buy stocks in the stock market, the money you pay does not go the company. When companies need money the usually go to institutional investors like banks and venture capitalists.
Jack once said that he should had never told anyone that he was indexing his funds and he would have become the richest and most famous fund manager there ever was. LOL.
5:18: The idea that index-fund capital-influx does not change the ratios of market capitalizations, holds true only if the fund purchases shares in a way that identically (or, at least extremely closely) mimics its underlying index. The fact is, most funds purchase only ~80% of their index; and, their index per se covers only a portion of its own broader market. For instance, the S&P 500 might (by cap.-value) comprise only ~80% of United-States equities, and, from here, a particular index fund may carry just 80% (cap.-value) of these businesses; therefore, theoretically, an index fund may elevate the stock prices of just the front ~64% of the overall market. I am not suggesting the above is a major problem, or that index funds are at all a bad idea. But, the math needs to be properly contemplated, if one is so curious.
The argument isn't about shaving an extra bp, it's about fund flows and cap weighted indexes getting bloated in just a few names. Specifically, FAANG stocks were nearly half of the market value even though the S&P 500 includes 495 other companies. It didn't last long, but the correction in 4Q18 showed a hint of outflows hurting index investors for the first time since 2015. What do you think will happen when we finally have a recession and corresponding bear market? There are plenty of investors that don't remember the tech bubble bursting, or even the great recession. The video starts to get to that point, but it ends too abruptly to flesh it out. If you don't see a bubble, why are Bezos, Cook and Zuckerberg selling millions of shares these past few years? It's not just about funding their family foundations!
Ok can someone explain that to me - the more the management company makes the less the investor makes. Aren't I and a couple more folk down the street the investors? I thought it's me as the dude putting the dosh into a business who is supposed to benefit from price rises? Im happy to accept invectives in return for an explanation
Market weighted index is to simulate the fact that if you had money to buy every single entire company in the index outright, that would be the performance you would be getting. For index fund that buys equal portion of each company then you are inherently having a biased on smaller cap companies with smaller influence in the economy with fewer assets under control.
I'm surprised he completely misunderstood the last question, if everyone holds the index the index basically confirms it's value in that of itself. Stocks at the top are directly supported by these market cap weighted indexes.
Nope, the proportion of each stock will also rise the same ratio as all the stock in the markets. What if you look at Market weightings in terms of ratios, does it make more sense? The ratios will remain the same regardless of price changes.
yes so as the market capital rises you buy more and as it fall say leaves the index you sell, so if say apple represented 10% of the market and now represents 11% cos the price went up you buy more
The $100 trillion of household wealth includes 4 items that cannot be valued objectively: * owner occupied real estate; * consumer durables, mainly motor vehicles; * equity in corporations whose stock is not publicly traded; * equity in unincorporated firms. Claims on defined benefit pension plans are not included in the Fed's calculations, but should be. That said, valuing such claims requires strong actuarial assumptions. Hence farms and rental properties directly owned by individuals should be excluded. I prefer to focus on deposits + listed financial assets, net of financial liabilities. That figure is at most $70 trillion.
Along with Warren Buffett, one of the great men of investing. I've had money with both of them for many years. Thinking I know a lot, I've lost money of my own. Long time smart. I got an even better return with Vanguard VFINX than just cost averaging over each year, by buying in advance on the dips.
Circular logic. Whenever you make it seem like there is only one answer, the answer is always wrong. If a mutual fund outperformed an index fund by a margin greater than annual fees, should you then invest in the index fund ? Fees are only one criteria, you should also look at performance over time in both up and down markets.
Isn't the ETF version of an index fund WORSE than the normal version of an index fund, because you have to pay "the spread" when you buy, and you also lose "the spread" when you sell? This evidently doesn't happen in normal index funds. I also think normal index funds are "no load" as in NO sales commission, whereas you have to pay a commission when you both buy and sell an ETF. So I don't understand why people ever choose to buy the ETF version. Yes, you can buy and sell ETFs on a moment's notice, but you can buy and sell at the end of every single day with a standard index fund, and that seems to be more than enough for virtually every occasion.
I call bullsh!t on American households having 100 trillion dollars in wealth. That comes out to an average of $800,000 per household. All we hear about is lots of people living paycheck to paycheck with no savings. There seems to be a huge disconnect.
The host mentioned home value being included in that number. It’s not that unbelievable when you account for the median American house price being around 200k. If the calculation was fixed to only include owner equity and subtract all debt, that 800k per household number would be a different story.
Even if you include real estate, that number still seems way too high. According to the Wall Street Journal, household wealth is at $98.746 trillion (probably did pass $100 trillion, as mentioned in the video). If you take the population as 326,640,140, divide by 2.54 (average household size), that is about $768K/household, or about $302K/person. That can't be right, as Zillow says the median home price is $215,600, and I just don't see the home equity plus another roughly $1/2 million in investments as the average household wealth. If this is right, the super wealthy are super rich, and those below them have a fraction of the wealth. I think wallethacks.com gives more reasonable numbers. According to them, the median value of assets for households under age 35 is $6,900, age 35-44 is $45,740, and age 45-54 is $100,404. This seems more in line with other information I've seen. I think the confusion here is average versus median (completely different statistics). If the original figures are correct, there is a huge, huge imbalance in wealth.
Dan Buchner - "If this is right, the super wealthy are super rich, and those below them have a fraction of the wealth." Uh, yep. You cracked the code. You know, this very thing is literally the textbook example of the importance of mean vs. median: ia800609.us.archive.org/17/items/HowToLieWithStatistics/Huff-HowToLieWithStatistics_text.pdf Chapter 2 is all about this... they were using the example of 10,000 pounds "average" wealth when the median was 2000. This book was published over 60 years ago.
US "household wealth" is $100 trillion? That seems WAY off! Divided by a US population of 325 million, that works out to about $308,000 per person! So the typical American family of 4 has a net worth of over 1.2 million bucks?! I think it's maybe only a half or a third of that.
The title of this clip is way off. The Vanguard founder in no way says there is a problem with index funds. Warren Buffett and his side-kick, Charlie Munger, say for the "no nothing investor," the S&P 500 index fund is the way to go. 70% of all mutual funds don't beat the S&P 500. Why don't more people do this? Buffett says it's because it's too easy.
RIP, Jack. You changed the game and allowed the little guy to succeed in investing. Thank you for everything you did to make the game fair. I have taught these lessons to my children.
89 years old and this man is still sharp as a tack. Amazing.
Nothing amazing with ADRENOCHROME
@@Melvorgazh lol get help
@@vhufeosqap Hep for what??
@@Melvorgazh What is his harvesting source for adrenochrome? Have you ever tried it yourself?
"The problem with index funds is,all the darn money goes to the investors" Jack Bogle RIP
Michael Emonds No , it’s the problem with mutual funds
You seem confused. The problem with the financial markets is that the investing companies take their share first. Index funds trim that bridge considerably.
@@colin1818 Fidelity Zero series index funds have zero expense ratio. Literally 100% of the profits go to the investor.
Yeah, he said that - I think he misspoke - I think he meant mutual funds and their fund managers. With index funds, you can see how much you're paying if there's a delta between your fund and the index it's built to emulate (S&P 500 for example). With a mutual fund, you really don't know what they're taking, but you can bet it's a lot.
@Luís Andrade Oh, I see what you mean.
Jack Bogle, a true American Hero.... His innovation of index funds/low cost, give the Average Working Class American access to the productivity of the Capitalist System...Don't just be another hypnotized consumer(or Complainer)... Be an OWNER of the means of production.
Reasonable Speculation totally agree
The return on these things are shit. I'll stick to real estate. Hell, I have a better return on investment at the casino, which by the way is funded by my passive income in REAL ESTATE. The "average working class American" is a sucker.
Franky Baby .. Good that you found your specific areas of expertise.... Diversification (including RIETs and Real Estate Indexed fund) is a safer bet for the average guy.. Also over a 30 year stretch MOST people Will Lose to the casino... It could be no other way, the casino must make it's cut.
While I agree that the advent of low cost index investing opened the door to far more people than before it existed, low wages are still a massive barrier to saving/investing for low income workers. Wages in America need to catch up with productivity and profits and then the entry level worker will also be able to participate in the indexing boom.
+Franky I couldn't disagree with you more. Why is it that every time I see a comment from a real estate investor crapping all over index investing, they sound like an angry zealot? The idea the real estate is the only asset class where one can make good money is absurd and wrong. My own success with index investing is all the evidence I need. Real estate is the smallest asset class allocation in my portfolio because, while it is a necessary component due to its non-correlation to the broader market, real estate speculators and overly exuberant buyers create real estate bubbles that frequently overvalue that market, which leads to the bubble/burst cycles we constantly see in that market. Yes, there is some of that in the broader stock market for sure, but the overall stock market is far more diversified than real estate alone and, therefore, can generate excellent returns if you choose the right mix of index funds, and it has the added benefit of reducing the investor's overall risk.
This man was so sharp even in his latter years he still talked like he was in his 30's.
If I was only listening, there is no way I would think that he was 90 years old lol
@@CC-sp6kl yeah but if you’re looking you’d think you were talking to a 500 year old mummy.
Title of the video is way off, he doesn't see a problem with Index Funds. He is the inventor!
Brandon Barber haha exactly!
it's referring to people saying 'here's the problem with index funds...' and him debunking that position.
He didn’t debunk anything. He also didn’t give an answer to the criticism she brought forward.
The criticism was about poor capital allocation. Consider this, indexing is diversifying into every possible failure as well as success.
Debunking implies you provide empirical evidence. Jack didn’t answer the question nor give his objective opinion, he muscled his way out. Looks like she wasn’t impressed with the response or doesn’t know better.
Not saying indexing is bad, or wrong. However I’ve seen a lot of objective, misleading data brought forward to sell TIF’s. Indexing is a product and Jack is a business man, selling his product. Remember that.
"Jack Bogle on the problem with index funds"
There are no problems with index funds! - Jack Bogle
Brandon Barber not at all, the title basically says he'll talk on the subject. Kinda got me too so i had to double check.
Title of the video is very misleading. Jack Bogle clearly remains a very strong advocate of index funds.
Absolutely agreed.
Its is misleading but he points out the many financial services are now actively managing index funds which is a problem.
Agreed. Seems to be that he has a problem with mutual funds and not index funds.
I thought so too,
Remianed*
Jack is a very old man but if you truly watch he has a sharpe intellect and young spirit about him. Gotta appreciate people like this. How do they stay so young and engaged?
His net worth of $80 Million Dollars keeps him engaged.
Heart transplant...thats how
I absolutely agree! I just watched an interview with him and within the first minute of the interview, granted I had never heard him speak before, I could immediately tell how
sharp and well spoken he was
for his age, which was quite impressive!
Yes, he's old, but he has the "heart" of a man in his 30's!
@@243wayne1 he was much more involved as a teacher and advocate
RIP Jack Bogle, God bless you forever.
I think the best thing to remember from this interview is that Index Funds are great for investors; especially people who have no time to follow individual stocks
Quality investment is not that hard. But it is good to have a mixture of index and direct investment.
@@bighands69 You are suffering from over confidence bias, beating the index is harder then winning Olympics, and if you cant beat the index then you are wasting time and money buying individual stocks.
Facts you could have spent time earning more money to invest into the index creating more compound interest for yourself!
actually even for people who have time and/or the inclination to follow individual stocks, cos even the so-called best fund managers get beaten by the index...blessings
I’m surprised how strong his voice is for his age
He sounds about half his age wow
Change the title to "Vanguard Group founder on advantages of index funds"
>"Vanguard Group founder **addresses pros and cons** of index funds".
FTFY. late in the video he does respond to some criticism of index funds e.g. cap-weighting
This man is the Saint of no-load mutual funds 👌``
Can't thank this man enough.
Low vanguard fees mean we can choose to work fewer hours over our lifetime.
Rest In Peace jack , the best ever
This was a very smart guy that did a lot of good for ordinary folks.
For an old guy, he's got the heart of a man in his 30's!
did you write that realizing that he actually had a heart transplant ?
@@maciejguzek3442 yes, it's too far-fetched to be a mere coincidence.
Jack Bogle is remarkable. At 89 he was still smart, still well spoken, his body just wouldn't hold up. RIP.
this man should have been on radio
this is the man. I'm with vanguard, and yes - index funds. dollar cost averaging. rule of 72.
Ben Sanderson . Hi Ben I've got jitters about my s&p index with Vanguard... any words of wisdom for me?
never get emotional, or panic. if the market crashes - hold what you've got. don't sell. that is the time to buy.
S Avgoulis...all you need to do is when the market drops buy the s&p and soon after it going to recover at some point, it’s a way of stamping on your emotions “it takes balls” buy every month buy and hold no matter what soon you get to the point where you start not caring and you just go with it!!
Not a poorly titled video at all. If you listen to Mr. Bogle he explains exactly what the "problem" is with index funds. The problem, if you will, is that all the darn money goes to the investors to quote Mr. Bogle.
What a clickbait title
They can weasel out of it with semantics easily and justify the title. A big problem with index funds is they are under-owned, according to Bogle. But Bogle also mentions here that the passive investing style suited to owning index funds has been perverted by those who trade them too often now. So that is a problem -- they are "over-traded" when they should be held long term. So, the problem with index funds is clear according to Bogle -- they are under-owned and over-traded.
Love Mr. Bogle and anything he has to say. I hope I’m this sharp when I’m his age.
I miss him. He died in January 2019
There is no competition when one company owns everything
Very sharp guy, I have read his books and loved them
He spoke clear and plain to the end!
That intellectual mind he aquiered over decades made him sharper than a razor blade.
What a good man RIP
I was shocked when I find that this gentleman was at his 89 and died a year later. He talks like in his 30's. What a legend.
Jack Bogle has no issue problem with Index Funds, this is a clickbait from Fox Business. Title is very misleading!! I did not expect this from Fox.
They can weasel out of it with semantics easily and justify the title. A big problem with index funds is they are under-owned, according to Bogle. But Bogle also mentions here that the passive investing style suited to owning index funds has been perverted by those who trade them too often now. So that is a problem -- they are "over-traded" when they should be held long term. So, the problem with index funds is clear according to Bogle -- they are under-owned and over-traded.
"Nice to see you Jack." Jack: "UNLIMITED POWER!"
This also explains why
the Vanguard Group has removed its flagship 500 Index fund (VINIX) from its employees’ 401(k) plan. Not enough fees for Vanguard and too much return for the employees.
The last question about index funds being market cap weighted is not the question needed to be asked. What she should have asked Bogle is at what level of trading would passive index funds cause price discovery not to occur at the individual company level? Passive investing is currently viable as it relies on active management to create efficient markets.
If everyone switched to passive investing, the underlying composition of the index would never change. There most be a level of active trading needing to have an efficient market that promotes price discovery that passive investing can depend on.
Jack could have also narrated audio books. What a voice!
If i listen to hem i feel proud of being American which is atrange because i'am Albanian.
Exactly.
Wow what an amazing guy.
The critics are the guys that aren't making the money they used to. Long live Jack Bogle.
I remember watching her in 2006. She have someone on who said the real estate bubble was going to pop. She and her friends would openly laugh at them. Remember where Maria makes her money.
bob mar where she makes her money? Real estate?
that someone was Peter Schiff
He passed away about 7 mos after this video in Jan. 2019 - to the right of the views, is Jun 8, 2018 the upload date? I suppose this may have been taped much earlier. Curious if anyone knows when the clip is from.
Maria is golden. Vanguard did me well.
We as investors are betting on the performance of American companies
Johns one of the great innovators, who really did it for the average person. However, he failed to answer the question at the end- indexation by definition does not allocate capital in the most efficient way because it cares less what a particular company is doing and just buys everything. I anticipate that when indexation goes from 45% to 80% of assets invested in stocks that there will be incredibly inefficiency that even subpar active managers could take advantage of.
It’s simple: indexation only works if there are thousands of savvy active investors making the market efficient by buying cheap and selling expensive. If they were not doing that, there could not be indexation. Remember any investment vehicle that gets the type of love ETFs are getting, are likely to get into bubble territory unless people start thinking critically again.
Andy Fazliu could you elaborate more on this? I’m not very finance savvy so I don’t understand why indexation would fail if there weren’t enough active investors
The problem with index funds: 4:08. This video could have been 5 seconds long xD
“And they said a hero can save us I don’t want to stand here and wait”
Haha the math correction at the end with a very clear explanation.
really good interview
Maria could get it any day of the week.
this woman looks funny ripping off her glasses everytime the camera pans to her, like its for dramatic effect
Some say when you shake this mans hand you will surely get 1 million dollars.
That last question was really weird. Jack explained it really well.
1:58 They're Generated by workers... The whole reason it works is because an employee is agreeing to give up a portion of their labor value to a business with a pre-existing framework that facilitates an employee's ability to generate value.
That Capitalist structure isn't inherently good or bad, the morality of it comes from the value share an employee receives for their labor, and the conditions in which they must exist to generate that value.
So wtf is the problem with index funds ? Click bait title..waste of time
Well, I'm totally with index investing and I personally put over 60% of my investment in the sp500 index fund managed by Vanguard. The problem that Jack didn't really answer is, what happens to price allocation beyond the major companies currently being indexed. There are over 7000 securities listed in the US stock market, and we are saying the largest, perhapes the most well performing few hundreds of them represent the entire market? For every dollar invested in index fund, a dollar is lost in the market in other places. Walmart started as a small store in Alaska, Amazon was nothing but a book selling site 10 years ago. What we see as large, or mega caps nowadays all started as a small cap. I would argue that these companies become what they are today was because there were no index funds back in the days, when some investors actually look at the company they are betting their money on and not just buy them because they were included in a basket of stocks called "index". So, is indexing distording price discovery of mid or small cap? Or, how much of a problem will it become should be the problem waited to be answered. If Amazon were to start over but 10 years later, it may never be successful because it will not attract enough investments as a small cap and not part of an index. But we may end up with another company just like Amazon today but were much larger at the time, say Walmart Online, it may just earn the same amount of return for investors anyway. I guess only time will tell.
There will always be active investors, and you only need a very small number of active investors to ensure that the money gets distributed to where it needs to go. If an S&P500 company is overprice, some portion of active investors will sell it and invest into some startup or something that needs the money more.
Also when you buy stocks in the stock market, the money you pay does not go the company. When companies need money the usually go to institutional investors like banks and venture capitalists.
R.I.P.
Jack once said that he should had never told anyone that he was indexing his funds and he would have become the richest and most famous fund manager there ever was. LOL.
Thing is though that in the US, all major investors have to declare their holdings. It would've come up that he would have mirrored the S&P500...
why is there a picture of a prison behind him lol
5:18: The idea that index-fund capital-influx does not change the ratios of market capitalizations, holds true only if the fund purchases shares in a way that identically (or, at least extremely closely) mimics its underlying index.
The fact is, most funds purchase only ~80% of their index; and, their index per se covers only a portion of its own broader market. For instance, the S&P 500 might (by cap.-value) comprise only ~80% of United-States equities, and, from here, a particular index fund may carry just 80% (cap.-value) of these businesses; therefore, theoretically, an index fund may elevate the stock prices of just the front ~64% of the overall market.
I am not suggesting the above is a major problem, or that index funds are at all a bad idea. But, the math needs to be properly contemplated, if one is so curious.
$SFILX $SWPPX #schwab
Misleading title, no problem with index funds
jack has a golden voice
Mr.Vanguard
The argument isn't about shaving an extra bp, it's about fund flows and cap weighted indexes getting bloated in just a few names. Specifically, FAANG stocks were nearly half of the market value even though the S&P 500 includes 495 other companies. It didn't last long, but the correction in 4Q18 showed a hint of outflows hurting index investors for the first time since 2015. What do you think will happen when we finally have a recession and corresponding bear market? There are plenty of investors that don't remember the tech bubble bursting, or even the great recession. The video starts to get to that point, but it ends too abruptly to flesh it out. If you don't see a bubble, why are Bezos, Cook and Zuckerberg selling millions of shares these past few years? It's not just about funding their family foundations!
Legend….
He is my hero.
Plot twist: “there is no problem”
Ok can someone explain that to me - the more the management company makes the less the investor makes. Aren't I and a couple more folk down the street the investors? I thought it's me as the dude putting the dosh into a business who is supposed to benefit from price rises? Im happy to accept invectives in return for an explanation
Not bad for 90 years old 👍🏾
Respect the legend
Market weight index funds are inherently large cap biased. Good to tilt to small caps.
Market weighted index is to simulate the fact that if you had money to buy every single entire company in the index outright, that would be the performance you would be getting. For index fund that buys equal portion of each company then you are inherently having a biased on smaller cap companies with smaller influence in the economy with fewer assets under control.
I'm surprised he completely misunderstood the last question, if everyone holds the index the index basically confirms it's value in that of itself. Stocks at the top are directly supported by these market cap weighted indexes.
Contrary to the title, no where in this video was mentioned the problem with index funds.
does nt that mean as prices rise you have to buy more and as prices fall , the drag tends to increase and your selling?
Nope, the proportion of each stock will also rise the same ratio as all the stock in the markets. What if you look at Market weightings in terms of ratios, does it make more sense? The ratios will remain the same regardless of price changes.
yes so as the market capital rises you buy more and as it fall say leaves the index you sell, so if say apple represented 10% of the market and now represents 11% cos the price went up you buy more
My t Rowe 401k fund charges 0.75% but it made 4% more last year than my fidelity 500 fund that charges near nothing.
A timeline of only one year is too short to be meaningful
Great man
The $100 trillion of household wealth includes 4 items that cannot be valued objectively:
* owner occupied real estate;
* consumer durables, mainly motor vehicles;
* equity in corporations whose stock is not publicly traded;
* equity in unincorporated firms.
Claims on defined benefit pension plans are not included in the Fed's calculations, but should be. That said, valuing such claims requires strong actuarial assumptions.
Hence farms and rental properties directly owned by individuals should be excluded.
I prefer to focus on deposits + listed financial assets, net of financial liabilities. That figure is at most $70 trillion.
It's nice on occasion when you see some one in the financial industry speak the plain truth.
A change to a index fund?
Bro he is sharp
How does this business analyst Maria not know the basics of how a mutual fund works?
Oh believe me, she does. She has a net worth of $22 Million.
Hey, she has a cute face, firm ass, and perky tits. So QUIT yer complainin'! ;-)
Yeah, in every interview she seems like a novice, and she's a host and alleged expert for 20 years on Wall St.
She's setting up the interviewee to discuss the topic. I think she knows how mutual funds work lol
Over time, more than 50% of mutual fund does not outperform index fund.
Motherfkn mutual funds investing in index funds. These fkers charge like hell then end up investing index. Hilarious.
long term, index funds are top quartile or better
The man!
Bogle looks great
RIP JACK
Desmond, good to see you hear. I hope atlanta is going well for you.
Click bait title, solid content.
Along with Warren Buffett, one of the great men of investing. I've had money with both of them for many years. Thinking I know a lot, I've lost money of my own. Long time smart. I got an even better return with Vanguard VFINX than just cost averaging over each year, by buying in advance on the dips.
Circular logic. Whenever you make it seem like there is only one answer, the answer is always wrong. If a mutual fund outperformed an index fund by a margin greater than annual fees, should you then invest in the index fund ? Fees are only one criteria, you should also look at performance over time in both up and down markets.
Again profit gets shrunken by fees,if the market is up OR down.
I don't own a index fund I have the Wellesley income fund
Eliminate the gap with blockchain
He's not the pioneer he's the Native American that found it.
Isn't the ETF version of an index fund WORSE than the normal version of an index fund, because you have to pay "the spread" when you buy, and you also lose "the spread" when you sell? This evidently doesn't happen in normal index funds.
I also think normal index funds are "no load" as in NO sales commission, whereas you have to pay a commission when you both buy and sell an ETF.
So I don't understand why people ever choose to buy the ETF version. Yes, you can buy and sell ETFs on a moment's notice, but you can buy and sell at the end of every single day with a standard index fund, and that seems to be more than enough for virtually every occasion.
Classical Liberal Warrior ETFs are more tax efficient. They're better in taxable brokerage accounts. Mutual funds are made for retirement accounts.
I call bullsh!t on American households having 100 trillion dollars in wealth. That comes out to an average of $800,000 per household. All we hear about is lots of people living paycheck to paycheck with no savings. There seems to be a huge disconnect.
Bri I - I agree. And many homeowners in bubbly markets are upside down equity-wise.
The host mentioned home value being included in that number. It’s not that unbelievable when you account for the median American house price being around 200k. If the calculation was fixed to only include owner equity and subtract all debt, that 800k per household number would be a different story.
Even if you include real estate, that number still seems way too high. According to the Wall Street Journal, household wealth is at $98.746 trillion (probably did pass $100 trillion, as mentioned in the video). If you take the population as 326,640,140, divide by 2.54 (average household size), that is about $768K/household, or about $302K/person. That can't be right, as Zillow says the median home price is $215,600, and I just don't see the home equity plus another roughly $1/2 million in investments as the average household wealth. If this is right, the super wealthy are super rich, and those below them have a fraction of the wealth.
I think wallethacks.com gives more reasonable numbers. According to them, the median value of assets for households under age 35 is $6,900, age 35-44 is $45,740, and age 45-54 is $100,404. This seems more in line with other information I've seen. I think the confusion here is average versus median (completely different statistics). If the original figures are correct, there is a huge, huge imbalance in wealth.
It's also not uniformly distributed. Majority of that wealth will be owned by the top 0.1%
Dan Buchner - "If this is right, the super wealthy are super rich, and those below them have a fraction of the wealth."
Uh, yep. You cracked the code. You know, this very thing is literally the textbook example of the importance of mean vs. median:
ia800609.us.archive.org/17/items/HowToLieWithStatistics/Huff-HowToLieWithStatistics_text.pdf
Chapter 2 is all about this... they were using the example of 10,000 pounds "average" wealth when the median was 2000. This book was published over 60 years ago.
US "household wealth" is $100 trillion? That seems WAY off! Divided by a US population of 325 million, that works out to about $308,000 per person! So the typical American family of 4 has a net worth of over 1.2 million bucks?! I think it's maybe only a half or a third of that.
The title of this clip is way off. The Vanguard founder in no way says there is a problem with index funds. Warren Buffett and his side-kick, Charlie Munger, say for the "no nothing investor," the S&P 500 index fund is the way to go. 70% of all mutual funds don't beat the S&P 500. Why don't more people do this? Buffett says it's because it's too easy.
Vanguard rules
It's all about the fees
This title is INCORRECT and MISLEADING. He doesn't say index funds are a problem at all.
Where is the clickbait reporting button, CZcams?
Haha the title of the video really ought to be ‘the problem with index fund for money grubbing, unnecessary, intermidatory financial managers..’
You have to believe anyone who is 186 years old.
I am looking at the left side of the screen a lot more than the right side.