how to divest while holding the index

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fr00t
Posts: 2
Joined: Sun Feb 18, 2018 3:56 pm

how to divest while holding the index

Post by fr00t » Mon Oct 07, 2019 8:50 pm

I'm 100% VTSAX right now, but out of curiosity I was wondering how to best *divest* yourself of specific companies (say, XYZ) while still basically holding the index.

You could approximate the index with individual shares and just not buy that company. You could hold the index and sell XYZ short. But I have a vague sense that unlike regular equity positions, such instruments have negative EV since you are betting against the market, and extra fees to boot - I don't want to actively bet against it, I just want to avoid it (or, is this a distinction without a difference?)

Any way to truly and easily achieve VTSAX - XYZ?

Silk McCue
Posts: 3115
Joined: Thu Feb 25, 2016 7:11 pm

Re: how to divest while holding the index

Post by Silk McCue » Mon Oct 07, 2019 8:55 pm

Why would you want to and do you think doing so will have a positive outcome for your total financial return? And if so, over what period of time?

Cheers

aristotelian
Posts: 6216
Joined: Wed Jan 11, 2017 8:05 pm

Re: how to divest while holding the index

Post by aristotelian » Mon Oct 07, 2019 9:07 pm

I don't think you can hold the index and divest, by definition. Arguably, you could create some kind of option bet against carbon related industries, the option bet does not change the fact that you own the index and stand to profit from oil, etc. Arguably, you could make the option bet without holding the index and get the best of both worlds.

Personally, I think you are better off doing what you can to ensure that carbon related industries aren't profitable, i.e. boycotting and shifting your consumption to green industries.

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William4u
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Joined: Fri Jun 01, 2012 3:02 pm

Re: how to divest while holding the index

Post by William4u » Mon Oct 07, 2019 9:15 pm

I have seen suggestions to put money into something analogous to carbon offsets. So if you are concerned about XYZ's doing X, then for example give to charities that correct for X. So, if you are concerned with companies causing global warming, you might give money to charities and companies that are providing solutions.

DonIce
Posts: 701
Joined: Thu Feb 21, 2019 6:44 pm

Re: how to divest while holding the index

Post by DonIce » Mon Oct 07, 2019 10:31 pm

Just short the company you don't like by the right amount. I.e. if you have $100k in an S&P500 fund and you don't like company XYZ which comprises 0.5% of the index, and their shares are trading at $50/share, then short sell 10 shares. Your net position in the company will then be 0, not an active bet against it. You can now do this commission-free at many brokerages, and stocks of many companies in the S&P500 can be shorted without paying any borrowing fee/interest.

On the other hand, many smaller companies can't be shorted without paying hefty borrow fees, so I wouldn't recommend that.

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1789
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Joined: Fri Aug 16, 2019 3:31 pm
Location: OR

Re: how to divest while holding the index

Post by 1789 » Tue Oct 08, 2019 1:33 pm

I think you are holding probably the best mutual fund out there. So I would just say you will get better returns by not doing anything other than adding more into it.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Phineas J. Whoopee
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Joined: Sun Dec 18, 2011 6:18 pm

Re: how to divest while holding the index

Post by Phineas J. Whoopee » Tue Oct 08, 2019 1:50 pm

One suggestion I've sometimes seen here is to accept the index return, but then donate an appropriate amount of it (assuming the return was positive over any measured period) to a cause or causes aligned with your values.
PJW

cashboy
Posts: 130
Joined: Tue Sep 11, 2018 5:03 pm

Re: how to divest while holding the index

Post by cashboy » Tue Oct 08, 2019 1:57 pm

fr00t wrote:
Mon Oct 07, 2019 8:50 pm
Any way to truly and easily achieve VTSAX - XYZ?
not really.


similar goal (in some ways); maybe worth a read:


viewtopic.php?t=284874
FSPSX - FXAIX - FXNAX - CD - CASH - canned beans - rice

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