The magic of stock indices

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landhome
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The magic of stock indices

Post by landhome »

The individual components of the stock indices change (e.g., https://en.wikipedia.org/wiki/Historica ... al_Average ).

Furthermore the value of an index is based on weights assigned to companies (e.g., http://indexarb.com/indexComponentWtsDJ.html )

Furthermore, there are differences in calculating the weight of the companies in these indices (e.g., https://www.slickcharts.com/sp500 vs https://www.slickcharts.com/dowjones )

Furthermore, the weight of these companies in the indices change based on their valuations and those change a lot (e.g., https://howmuch.net/articles/100-years- ... -companies ).

I think it is safe to say that the current weight of the current companies in these indices will change in the future. Furthermore, I think, there is a (large?) probability that the top cos (Apple/Amazon/Microsoft/etc) may not be here in 50 years.

Thus, the reason why DOW/SP500/Nasdaq go up may not be due to the individual components but due to the methodology of changing the weights of those components.

Thus, we may not actually be investing in the belief that the top 30/500/etc companies will perform well but we may be actually investing in the "magic" of the weight algorithms/formulas (e.g., the algorithm will kick the losers out of the indices quickly).

Is there truth in this? Or am I missing something here?
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Re: The magic of stock indices

Post by alex_686 »

landhome wrote: Wed Jul 01, 2020 2:00 pm Is there truth in this? Or am I missing something here?
Not exactly sure what you are trying to say.

I would not use the DJIA index. It is a horrid index. It has 2 advantages. You could calculate the index in a few minutes using a chalk board and a slide rule. This was important 100 years ago. Second, it has been around for 100 years. Which makes it interesting. Dow Jones has basically announced that it is a niffy historical thing, but they have much better indexes.

So let us move onto free-float market-cap indexes, where we are investing in large public companies. Are their quibbles about the exact definition of that underpins "free-float" and "large". Sure - but these are quibbles. Mostly the same.

So, we are investing in large public companies. Is this a static list? Nope. New companies are created, big companies grow, companies merge and separate, some go private while others declare bankruptcy. So what is one to do? Adjust to the market. Note, most of the adjustments are small.

It is like the paradox of the "Ship of Theseus" or as Arius Didymus said "upon those who step into the same rivers, different and again different waters flow". So maybe it is not exactly the same ship or river - but does it matter?
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Re: The magic of stock indices

Post by landhome »

but does it matter?
Yes. That's essentially my question. Does SP500 do well because the committee that select the companies that go in the index do well? Does SP500 do well because they nailed down the formulas/algorithms/methodologies of weighting correctly?

Had I invested individually in the SP500 companies of 50 years ago, it seems like I would not have done so well (I am not 100% sure of this statement but some manual calculations for the top cos indicate that this is so). However, had I invested in SP500 index, I would have done well (this is a fact). So I am not investing (mostly?) in SP500 because top 500 US companies will do well. I am investing in the belief that the current committee & algorithms that manage SP500 (which is probably adjusted based on past data) will do well in the future.
but does it matter?
If that's the best we can do, I guess it does not. However, it seems like there is a component of faith which makes me uncomfortable.

We agree that it's not the same "waters". It's not the river that does the magic either. It's the waves of the river that need to do well to detect and wash away the dead companies from SP500 at the right time and bring the new companies.
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Re: The magic of stock indices

Post by nisiprius »

Yes. The attacks on indexing that claim that indexers get sucked into buying the most overvalued companies... or are causing a tech bubble... or that index funds are forced to run out and buy more shares of Apple if the price of Apple goes up... are bogus.
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Re: The magic of stock indices

Post by Boglegrappler »

The index does well because the companies do well.

The weighting isn't done by committee, its done by the market.

There is an element of active management that enters in when the companies in the index change, but that is something that happens slowly over time. Here's an article that will shed some insight.


https://blog.qad.com/2019/10/sp-500-companies-over-time
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Re: The magic of stock indices

Post by landhome »

The index does well because the companies do well.
This doesn't seem to be true. Not in the long run. I couldnt find the list of all cos that were in SP500 50 years ago, but the return of the top 10 (IBM, ATT, Kodak, GM, Standard Oil, Texaco, Sears, GE, Polaroid, Gulf Oil) that were in SP500 50 years ago are terrible compared to the index itself.

PS. That's for the link. I didnt mean to imply that weighting is done by the committee. It's a methodology/formula/algorithm. My point is that it's what we believe in. Not that the top X cos will do well in the future.
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Re: The magic of stock indices

Post by alex_686 »

landhome wrote: Wed Jul 01, 2020 3:45 pm Yes. That's essentially my question. Does SP500 do well because the committee that select the companies that go in the index do well? Does SP500 do well because they nailed down the formulas/algorithms/methodologies of weighting correctly?
The committee really does not do much. Free-Float Market Cap does not leave much room for interpenetration. There are some edge cases on what is a US company. The free float shares chosen by the S&P committee is within a hair's width of the free float chosen by the FTSE Russell committee, which is basically the same as MSCI.
landhome wrote: Wed Jul 01, 2020 3:45 pmHad I invested individually in the SP500 companies of 50 years ago, it seems like I would not have done so well (I am not 100% sure of this statement but some manual calculations for the top cos indicate that this is so). However, had I invested in SP500 index, I would have done well (this is a fact). So I am not investing (mostly?) in SP500 because top 500 US companies will do well. I am investing in the belief that the current committee & algorithms that manage SP500 (which is probably adjusted based on past data) will do well in the future.
There are 2 legs to this.

First, what do you mean by 'individually in the SP500 companies of 50 years ago'. What are you going to do with the dividends? What about when one company gets bought out by another for cash? What about mergers?

Second, and more importantly, Index investing rests on, IIRC Modern Portfolio Theory (MPT), which states that the most efficient portfolio (maximum return for minimum risk) would hold all assets at their market weight. There are a fair amount of debate between this theory and actual practicability.

From a practical view, investing in a large free-float market-cap index does a reasonable job of mimicking the investable universe. It also answers what to do with dividends, mergers, bankruptcies, etc.
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landhome
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Re: The magic of stock indices

Post by landhome »

First, what do you mean by 'individually in the SP500 companies of 50 years ago'. What are you going to do with the dividends? What about when one company gets bought out by another for cash? What about mergers?
No matter what I do with dividends, mergers, acquisitions, it seems like a static investment to top 500 companies with their weights 50years ago in SP500, would not have been a good investment. I think I did enough math to say that it would have been a terrible idea. Most/some of the top cos in SP500 today did not exist 50 years ago and vice versa.
the most efficient portfolio (maximum return for minimum risk) would hold all assets at their market weight
Thanks. This is what I was missing and the answer to what I was referring as "magic". The magic is constantly "hold all assets at their market weight" and not "invest in the top X companies" as I originally thought. To do that,
a) the index has to churn the companies in the index. This dynamic nature of indexing is what makes it partially work (I think). I'm now quite convinced that 50years later the top cos in US will be mostly different than what we have today and some of the top cos in the future SP500 do not yet exist. The supersized added value of those will be what will carry the market to new heights. This part, I'm now convinced (still not 100% but mostly)
b) If "hold all assets at their market weight", does that mean the indices need to buy/sell shares when cos sell/buy back shares? This might be another reason why indices can detect losers and get rid of them.

I need to do some more thinking. Thanks a lot for all the pointers.
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Re: The magic of stock indices

Post by nisiprius »

1) I don't completely understand your thinking, but I don't thing stock indices are "magic" in the way you think.

2) Don't forget, the largest mutual fund in the world is not the Vanguard 500 index fund with "only" $519 billion, but the Vanguard Total Stock Market Index Fund with $860.7 billion. How does your thinking apply to the Total Stock Market Index Fund?
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Re: The magic of stock indices

Post by grabiner »

landhome wrote: Wed Jul 01, 2020 6:18 pm
the most efficient portfolio (maximum return for minimum risk) would hold all assets at their market weight
Thanks. This is what I was missing and the answer to what I was referring as "magic". The magic is constantly "hold all assets at their market weight" and not "invest in the top X companies" as I originally thought. To do that,
a) the index has to churn the companies in the index. This dynamic nature of indexing is what makes it partially work (I think). I'm now quite convinced that 50years later the top cos in US will be mostly different than what we have today and some of the top cos in the future SP500 do not yet exist. The supersized added value of those will be what will carry the market to new heights. This part, I'm now convinced (still not 100% but mostly)
There is no churn needed for a total-market index. If a stock doubles in price, the index needs to hold twice as much of the stock, but it holds the same number of shares.

An S&P 500 index has turnover as companies enter and leave the index, but the companies which enter and leave are usually the smallest companies, so there is very little turnover.
b) If "hold all assets at their market weight", does that mean the indices need to buy/sell shares when cos sell/buy back shares? This might be another reason why indices can detect losers and get rid of them.
The index does need to buy or sell shares when the company changes the outstanding number of shares. If an index holds 1% of a company, and the company has a million shares and buys back 50,000, the index must go from 10,000 to 9500 shares of the company.

But the effect is the same as if the company pays a dividend instead. If the company has a million shares worth $100 per share, and declares a $5 dividend, the stock price will drop to $95 if the market doesn't move, since owning a share worth $100 pre-dividend gives you the right to $5 in cash and one post-dividend shares. The index fund will still hold 10,000 shares, but those shares are now worth 5% less. Whether the company used $5M to buy back stock or pay a dividend, it has $5M less in cash and the index fund has $50,000 less invested in the company.
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Re: The magic of stock indices

Post by MotoTrojan »

landhome wrote: Wed Jul 01, 2020 6:18 pm
b) If "hold all assets at their market weight", does that mean the indices need to buy/sell shares when cos sell/buy back shares? This might be another reason why indices can detect losers and get rid of them.

This is where your deep confusion stems from. Market cap weight funds hold the funds in their proportion of the market. If Apple is 5% of the index, and it's stock drops 50%, it will now be closer to 2.5% of the index. Your index fund doesn't have to sell or buy a single thing, the price of Apple got cut in half, so naturally it became a smaller portion of your holdings automatically.

The only time a market cap weighted fund needs to buy/sell is when companies enter/exit the index, but this is not a huge return driver or common event.

The S&P500 has done amazing in the last decade as large growth companies have done well, but over the long-run while efficient in a cost/trading/tax sense, it hasn't beaten other strategies including buying equal weights of the S&P500 funds and rebalancing every quarter, etc...
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Re: The magic of stock indices

Post by MNGopher »

One of the great benefits of index investing is that for every company in the index the upside is greater than the downside for the collective fund. The worst that any company can do is lose 100% of it's value, and it will usually be dropped from the index long before it loses all it's value. The upside on the other hand, is virtually unlimited and a company can increase in value by 200%, 500%, etc. Author and blogger JL Collins describes this as the index being "self cleansing", in that they flush out the dogs over time, while adding new companies, some of which could become the Apples and Googles of tomorrow. This, along with population growth and technological advancements helps the upward growth of the indexes over time.
Last edited by MNGopher on Thu Jul 02, 2020 1:00 pm, edited 1 time in total.
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Re: The magic of stock indices

Post by Nate79 »

Even if you believe the S&P500 index people are somehow cooking the books to make it go up over time it doesnt matter because it is tracking almost exactly the total stock market index which by its definition is just holding all of the companies at their market weight.

So the whole argument is a waste of time even if it were true.
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Re: The magic of stock indices

Post by alex_686 »

landhome wrote: Wed Jul 01, 2020 6:18 pm a) the index has to churn the companies in the index. This dynamic nature of indexing is what makes it partially work (I think). I'm now quite convinced that 50years later the top cos in US will be mostly different than what we have today and some of the top cos in the future SP500 do not yet exist. The supersized added value of those will be what will carry the market to new heights. This part, I'm now convinced (still not 100% but mostly)

b) If "hold all assets at their market weight", does that mean the indices need to buy/sell shares when cos sell/buy back shares? This might be another reason why indices can detect losers and get rid of them.
Hence my "Ship of Theseus" reference. It was a famed ship which the Greeks were constantly repairing. After a while they had replaced every plank, rope, and sail. Was it the same ship?

Yes, indexes are constantly 'churning' the index when they issue new shares and buy backs. That is a good insight. I would argue it is more of a course correction. To extend the ship analogy, you are rowing towards a fixed target on shore. Currents are going to unexpected push you around. So you are going to have to constantly make minor course corrections.

That being said, I disagree with the statement "This might be another reason why indices can detect losers and get rid of them." This is false. The index is passive. It is trying to reflect the market, not judge it.

Specifically, it is underlying return of the asset that drives changes in the index. The index construction is pretty robust to gaming. A CFO can't manipulate the indexes return with trickery. Dividends, new share issuance, buy backs, spin-offs mergers, etc.
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Re: The magic of stock indices

Post by landhome »

How does your thinking apply to the Total Stock Market Index Fund?
It should be the same but there Total Stock Market Index Fund is much younger than SP500 with less historical information. My point, which I can formulate better now, is that some of the top drivers of an index, including the total stock market index fund, for the next 50 years probably do not yet exist or are not yet in the index.
so there is very little turnover
I dont think this is true. 20 new companies got added SP500 in the last year.
Except Johnson&Johnson, none of the top companies in SP500 were in the SP500 50 years ago. Here are the inclusion dates I could find.
Microsoft, 1994-06-01
Apple, 1982-11-30
Amazon 2005-11-18
Facebook, 2013-12-23
Alphabet 2014-04-03
Google 2006-04-03
Johnson & Johnson 1973-06-30
Berkshire Hathaway 2010-02-16
Visa 2009-12-21

These make about 1/4 of the index. Without the turnover, the indices would not have included these companies and could not have benefited from the amazing returns these companies made since their inclusion.
but the companies which enter and leave are usually the smallest companies
I dont think this is true either. For example, there is a rumor that SP500 is thinking of adding Tesla to the index, now the largest auto company in the world based on market cap.
The index does need to buy or sell shares when the company changes the outstanding number of shares.
It seems like this depends whether the index is free float or not. I did not have time to read more about this.
If Apple is 5% of the index, and it's stock drops 50%, it will now be closer to 2.5% of the index. Your index fund doesn't have to sell or buy a single thing, the price of Apple got cut in half
Of course. My lack of knowledge was what happens when Apple buys back (or sells new) shares.
while adding new companies, some of which could become the Apples and Googles of tomorrow
I agree. I think this is the main driver and the "magic".
S&P500 index people are somehow cooking the books
This never ever crossed my mind. Why would they?
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Re: The magic of stock indices

Post by Nate79 »

The turnover rate for Vanguards S&P500 fund for 2019 was 3.9%. Its extremely low.
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Re: The magic of stock indices

Post by sandramjet »

landhome wrote: Thu Jul 02, 2020 10:45 am These make about 1/4 of the index.
How do you get that? The index contains 500 companies. And they all count, not just the largest ones.
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Re: The magic of stock indices

Post by marcopolo »

sandramjet wrote: Thu Jul 02, 2020 11:34 am
landhome wrote: Thu Jul 02, 2020 10:45 am These make about 1/4 of the index.
How do you get that? The index contains 500 companies. And they all count, not just the largest ones.
The index is cap weighted, so while all companies count, bigger companies count a lot more.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: The magic of stock indices

Post by alex_686 »

marcopolo wrote: Thu Jul 02, 2020 12:09 pm The index is cap weighted, so while all companies count, bigger companies count a lot more.
You also have to figure that a decent amount of change was due to name changes, spin offs, and mergers.
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Re: The magic of stock indices

Post by landhome »

The turnover rate for Vanguards S&P500 fund for 2019 was 3.9%. Its extremely low.
I guess it depends on the timeframe about which we are talking. In 15yrs, that's a new index. (More than 50% of the cos in the index will be different).
How do you get that? The index contains 500 companies. And they all count, not just the largest ones.
There are weighted. https://www.investopedia.com/top-10-s-a ... ht-4843111
e.g., Microsoft Corp. (MSFT) has an index Weighting: 5.5%, i.e., MSFT counts more than the others.
The index is passive. It is trying to reflect the market, not judge it.
The index is not fully passive (i.e., not fully active as a mutual fund but still there is a committee). However, that is not I am talking about. The "judgment" was done when SP500 was designed (65years ago). The inclusion criteria (algorithm/formula/method whatever you want to call it), which doesnt change or changes very very slowly, is the magic. It selects companies (e.g., West Pharmaceutical Services, the last company that got added to SP500 or Tesla (soon?)) with the bias/faith that one of these will be the next Microsoft).

My thinking two days ago that when I invest in an index, I invest in the belief that the top X (e.g., 500) companies in the US/world would generate a good return is wrong. This was my confusion, lack of understanding/knowledge. The top X of yesterday were not the ones that generated the good return. The newer ones which reflect the markets/technologies that that did not exist yesterday were the ones that generated the good return.

Now I believe when I invest in SP500 or Total Stock Market Fund, I invest in the belief that these indices will select the new promising companies at the right time to be added to the index. By "select" I dont mean a person. The predefined inclusion/exclusion criteria upon which this index was created will do the selection at the right time. This is the magic.
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Re: The magic of stock indices

Post by HootingSloth »

You are correct that the indexes would not have done nearly as well if there were never any additions of ne companies to the indexes from the date they were first implemented.

However, there just is not that much "magic" required. Essentially all of the improvement would be captured by a rule that says to add any corporation whose common shares become listed on one of a handful of public exchanges.
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Re: The magic of stock indices

Post by Normchad »

There just isn’t magic here.

Apple was added in 1982 I think. I’m sure most people at that time had no idea what apple was, ore er saw a need for people to own computers.

I think Microsoft was added around 1994. I don’t think Windows was even widely in use at that time.

So it’s definitely not the case of cherry picking winners.
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Re: The magic of stock indices

Post by landhome »

However, there just is not that much "magic" required. Essentially all of the improvement would be captured by a rule that says to add any corporation whose common shares become listed on one of a handful of public exchanges.
Correct. You'll definitely have some shares of the winners in your index. However, the magic in which you have to believe is the return of the few select winners would be more than the money you waste at the IPO shares of the losers. Then that's the bias of your index. That's the magic you have to believe in. Will it work? Probably. Better than other biases/rules? Is this better than the inclusion criteria of SP500 (see below). I don't know.
So it’s definitely not the case of cherry picking winner
I disagree. The current inclusion criteria of SP500 includes
+ a market cap of $8.2 billion (as of Feb. 2019 guidance)
+ at least a year since its initial public offering
+ the sum of the previous four quarters of earnings must be positive as well as the most recent quarter.

I dont know what the rules were in 1982 and 1994 but I assume they were similar. The sole purpose of these rules are to cherry pick the winners. In 1982 and 1994, for the purposes of SP500, Apple and Microsoft looked like the winners and got included in SP500. That's cherry picking the winners or at least trying.

There is nothing wrong with that. I just didnt realize this until yesterday. When I invest in SP500, I invest in the belief that the inclusion criteria/commitee of SP500 will cherry pick the winners at the right time. That's it. I'm not saying this is wrong. I just had the wrong belief I was investing in the bias the current top 500 will do well.
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Re: The magic of stock indices

Post by Nate79 »

The S&P500 has tracked the return of the total stock market. Its selection criteria didn't matter because it's just tracked the total market which itself does not have a selection criteria - it just represents the cap weighted total stock market.

So again this is all a non issue.
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Re: The magic of stock indices

Post by HootingSloth »

landhome wrote: Thu Jul 02, 2020 2:48 pm
However, there just is not that much "magic" required. Essentially all of the improvement would be captured by a rule that says to add any corporation whose common shares become listed on one of a handful of public exchanges.
Correct. You'll definitely have some shares of the winners in your index. However, the magic in which you have to believe is the return of the few select winners would be more than the money you waste at the IPO shares of the losers. Then that's the bias of your index. That's the magic you have to believe in. Will it work? Probably. Better than other biases/rules? Is this better than the inclusion criteria of SP500 (see below). I don't know.
So it’s definitely not the case of cherry picking winner
I disagree. The current inclusion criteria of SP500 includes
+ a market cap of $8.2 billion (as of Feb. 2019 guidance)
+ at least a year since its initial public offering
+ the sum of the previous four quarters of earnings must be positive as well as the most recent quarter.

I dont know what the rules were in 1982 and 1994 but I assume they were similar. The sole purpose of these rules are to cherry pick the winners. In 1982 and 1994, for the purposes of SP500, Apple and Microsoft looked like the winners and got included in SP500. That's cherry picking the winners or at least trying.

There is nothing wrong with that. I just didnt realize this until yesterday. When I invest in SP500, I invest in the belief that the inclusion criteria/commitee of SP500 will cherry pick the winners at the right time. That's it. I'm not saying this is wrong. I just had the wrong belief I was investing in the bias the current top 500 will do well.
Read what the CRSP *actually does* in constructing the US total stock index (http://www.crsp.org/indexes-pages/crsp- ... logy-guide). Look at how closely the S&P 500 has tracked total stock. What you are saying may sound in the abstract like it makes sense, but you are incorrect. The tiny losses on small stocks that go nowhere just are not meaningful.
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Re: The magic of stock indices

Post by retired@50 »

landhome wrote: Wed Jul 01, 2020 3:45 pm
Had I invested individually in the SP500 companies of 50 years ago, it seems like I would not have done so well (I am not 100% sure of this statement but some manual calculations for the top cos indicate that this is so). However, had I invested in SP500 index, I would have done well (this is a fact). So I am not investing (mostly?) in SP500 because top 500 US companies will do well. I am investing in the belief that the current committee & algorithms that manage SP500 (which is probably adjusted based on past data) will do well in the future.
I'd suggest you read the book by Jeremy Siegel called "Stocks For The Long Run".

From Chapter 8 - The S&P 500 Index
One of the most remarkable aspects of these original 500 firms is that the investor who purchased the original portfolio of 500 stocks and never bought any of the more than 1,000 additional firms that have been added by Standard & Poor's in the subsequent 50 years would have outperformed the dynamic updated index. The return of the original 500 firms is more than 1 percentage point higher than the updated index's 10.07 percent annual return.
Regards,
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Re: The magic of stock indices

Post by Normchad »

It is an index of 500 big, economically significant companies. So when something’s gets added, it’s a not a surprise that it’s big, and has been a successful company.

The proposition here is making the index sound more like an actively managed fund. It’s certainly not that.

A lot of actively managed funds groom their holdings before reporting dates. They sell losers and add winners, so that their prospectus makes them look smart when it comes out. That isn’t going in here either....

It’s not magic.

We all know the line about past performance. But I don’t fully endorse that. I think past performance is the best indicator of future results. And I think we all honestly think that. We all think the stock market will be higher in the future, because, well, that’s what it does.

So I do expect 500 big successful companies to continue to be successful, by and large. Some are going to fail, nothing lasts forever. Even Sears.....
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Re: The magic of stock indices

Post by landhome »

The return of the original 500 firms is more than 1 percentage point higher than the updated index's 10.07 percent annual return.
If this is true, my starting premise is wrong. Then, my conclusions are also wrong. It is hard for me to believe this is the case though. However, I lack the data to prove otherwise. Just the observation that the top 10 of 50 years ago and top 10 now are completely different wont prove my starting point. And it is hard for me to believe that the static portfolio of 50years ago would do well without the technology stocks. However, it is possible. I will try to find the components of SP500 of 50 years ago and do some math.
look at how closely the S&P 500 has tracked total stock
Its selection criteria didn't matter because it's just tracked the total market which itself does not have a selection criteria
Valid points.
But we're left to explain why, over history from 1928 on, the annual return in the S&P 500 has been 10.4 percent while the return on the Total Stock Market has been 10.2 percent (see the Little Book of Common Sense Investing).
-John C. Bogle on the S&P 500 vs. the Total Stock Market (https://www.cbsnews.com/news/john-c-bog ... ck-market/ )

Well if John C. Bogle, while accepting it shouldn't have, doesn't even try to explain why S&P 500 & Total Stock market behave the same, what is there for me to say.

Overall, I might have been completely wrong. I will do some more research about the components of the SP500 of 50years ago though.

Thanks a lot.
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David Jay
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Re: The magic of stock indices

Post by David Jay »

Nate79 wrote: Wed Jul 01, 2020 10:04 pm Even if you believe the S&P500 index people are somehow cooking the books to make it go up over time it doesnt matter because it is tracking almost exactly the total stock market index which by its definition is just holding all of the companies at their market weight.
This!
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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retired@50
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Re: The magic of stock indices

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landhome wrote: Fri Jul 03, 2020 11:55 am
The return of the original 500 firms is more than 1 percentage point higher than the updated index's 10.07 percent annual return.
If this is true, my starting premise is wrong. Then, my conclusions are also wrong. It is hard for me to believe this is the case though. However, I lack the data to prove otherwise. Just the observation that the top 10 of 50 years ago and top 10 now are completely different wont prove my starting point. And it is hard for me to believe that the static portfolio of 50years ago would do well without the technology stocks. However, it is possible. I will try to find the components of SP500 of 50 years ago and do some math.
To be a bit more precise, The S&P 500 was born on February 28, 1957. Jeremy Siegel was referring to the original 500 firms named into the S&P 500 at that time. Not the firms from "50 years ago". 50 years ago is circa 1970.

I was referring to his book "Stocks For The Long Run" copyright 2014 the Fifth Edition. Chapter 8 is all about the S&P 500.

Prior to 1957 there were not 500 firms in the S&P composite index, there were 90 firms from 1926 to Feb. 1957.

Regards,
This is one person's opinion. Nothing more.
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