CULater wrote: ↑
Tue Nov 28, 2017 10:21 pm
Just wondering -- who takes the other side of the trade on factor funds and why are they so dumb? Oh, I guess it's us market index fund investors...
One theory is that it is big money managers, both in funds and in institutional investing accounts, who "know better" and would like to use factors, but can't because of, in effect, behavioral errors forced on them by career considerations.
To me, another likely theory is that a lot of them are indeed small retail investors who have gotten sucked in by the latest article in money magazines, radio shows, or the magazine-like thingies some brokers sen quarterly, who are not
indexers. I honestly believe that I would get sucked in myself if I weren't indexing. So, there may be such a thing as investing skill, and who can
indeed get a (small, occasional) edge out of a non-indexing strategy... but I'm not one of them, and if I didn't index I'd be in the crowd that gets money taken away from me by factor and active investors. (If I did factor investing myself, I suspect it wouldn't work for me and after the fact I'd get told that I'd been doing it wrong).
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.