Index funds....encourage market timing/stock picking?

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bondsr4me
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Joined: Fri Oct 18, 2013 7:08 am

Index funds....encourage market timing/stock picking?

Post by bondsr4me » Wed Dec 06, 2017 7:11 am

Nice article about the ever growing number of index funds available to investors.

I can’t help but wonder if the narrow focus of many of them do actually encourage market timing and stock selection.

Here’s the link..

https://www.marketwatch.com/story/index ... 2017-12-06

Have a great day,

Don

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JoMoney
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Re: Index funds....encourage market timing/stock picking?

Post by JoMoney » Wed Dec 06, 2017 7:49 am

Quite true... They're not necessarily 'stock picking' but many investors these days are into 'thematic investing', 'factor tilting', and other strategies that are active investing. Using index funds can make cheaper to do some styles of active investing, but that doesn't make it any easier to achieve anything extra in performance. Sharpe's "Arithmetic of Active Management" is still in play...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

mega317
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Joined: Tue Apr 19, 2016 10:55 am

Re: Index funds....encourage market timing/stock picking?

Post by mega317 » Wed Dec 06, 2017 1:09 pm

The article you link doesn't really have much substance, and I think (though I didn't read all 55 pages) it slightly overstates the conclusions of the referenced study.

I think I've come to the conclusion that someone who wants to speculate is going to do so. In the past one might have purchased shares of a few energy companies, now they'll purchase an energy fund.

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