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how to divest while holding the index

Posted: Mon Oct 07, 2019 8:50 pm
by fr00t
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?

Re: how to divest while holding the index

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

Re: how to divest while holding the index

Posted: Mon Oct 07, 2019 9:07 pm
by aristotelian
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.

Re: how to divest while holding the index

Posted: Mon Oct 07, 2019 9:15 pm
by William4u
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.

Re: how to divest while holding the index

Posted: Mon Oct 07, 2019 10:31 pm
by DonIce
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.

Re: how to divest while holding the index

Posted: Tue Oct 08, 2019 1:33 pm
by 1789
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.

Re: how to divest while holding the index

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

Re: how to divest while holding the index

Posted: Tue Oct 08, 2019 1:57 pm
by cashboy
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:


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