Especially, given that overall with passive investing, I save LOTS of money over time re tax efficiency AND better overall performance. Guys like this just want clicks -- they're not AT ALL credible.
Look at it this way. There is no perfect strategy. Bubble or not. Index/ETF investing is still the best option for the average joe. We don't get paid to sit around and analyse balance sheets 8 hours a day. For the common man index investing is still the best option!
You are correct and worst of all as he said most of them are terrible at it. I worked at Morgan Stanley in an active management part of the business. Most if not all of our active managers were not beating the index. I got shot down when I mentioned this. Passive management is a dirty word. I feel this video has overplayed the issue. Whilst he’s correct regarding the s&p500, the issue on the vast majority of other etfs is non-existent
@@shiftykiwiofcourse u got shot down. Its like u said smoking is bad whilst working for marlboro. People dont like seeing the truth when their income depends on NOT seeing the truth Scumbags live off AUM and not performance gotten. I have spoken to 8 best i vestor firms and none could beat me (sp500 index) over any period of time. Trust me, they were NOT happy with me telling them this
If the AI bubble explode, a supposly diversified index, with 500 companies in every profitable sector, will go down 16%. And that is not comting the people in the ETF that will sell there share when it goes down 10 or 15%. The problem is the influence of a single sector on the ETF, espaccialy when this sector is so hard goes all in in the unkowned
I have 35% of my capital investments in an IRA, 25% in index funds, and the balance spread across other investment accts totalling over $250k. I took a big hit in Q4, 2023. Right now i am just looking for ways to recover in 2024.
There are a lot of strategies to make tongue-wetting profit especially in this down market, but such sophisticated trades can only be carried out by proper market experts
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $$275k to $850K...
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
My CFA Annette Christine Conte a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
@@sauercrowder If you put money into anything just because it's been going up, then that's called recency bias. The US has revived a dead horse in the past by throwing cash at the economy, but just like PE ratios, national debt can't grow to infinity. This isn't sustainable.
@@will4417 You're literally watching a video about the fact that people are continuously adding more and more of their money to the market. There is no reason to believe the next correction will somehow be permanent, and if it is you've got bigger problems. "Buy the dip" is bad advice, sure, but if you're still investing passively and intending to hold for a long time, there is really nothing wrong a strategy of buying more aggressively after a downturn. It just angers people like you because you think you're smarter than that and that there should be justice in the market where your overthinking is more profitable than someone else's dead simple investing strategy and discipline.
To be fair the market has never seen a global pandemic. Everything I learned in college about finance is not happening. Inverted yield curve, interest rates rising, more demand for bonds… yet there has been no negative price action in the market. Nothing makes sense and I refuse to employ my money into the markets today. I still think it’s a bubble and I’m firm on my stance. There will be a crash.
It's not a bubble. It's that there is so much debt in the system, central banks have to monetize the debt to keep the system from collapsing. All that's happening is global liquidity is rising like 8-10% per year and it's repricing the price of scarce assets via currency debasement. Basically if you divide SPY or VOO by the Federal Reserve balance sheet, the market has been flat since 2008. I mean you can stop passively investing because you think it's a bubble. But if that bubble bursts then even your cash sitting on some bank's computer system or in a stable value fund in a 401k is going to get confiscated by the banks to back stop a systemic collapse. That happened in Greece over a decade ago. So it's safer to just leave it in the market. You're more at risk of being left behind by currency debasement than you are of a 80% collapse of the SPY.
That is a reasonable argument. Stocks may be a good hedge against inflation. But if you are worried about inflation gold and gold stocks might be a better choice.
"They are invested into not because of business performance, but simply because they are in an index" Yes, but why are they in the index? Probably because of business performance(checked by the index provider), so there is no problem after all, I guess?
Not really. The index is like a tape measure, and only measures one thing - market cap. It doesn't measure fundamental performance. And there are different measures like the S&P 500 Equal Weight Index. You don't know which one is telling the truth do you? That's why you have to know which index doesn't provide misleading results. Do it's time to brush up on your understanding of how indices can be constructed to polish poop.
@@CuriousCrow-mp4cx "only measures one thing - market cap. It doesn't measure fundamental performance." Yes, but fundamental performance (or estimation and prediction of it by active market participants) affect the stock price and thus also the market cap and share in the index.
@@seneca983 Yes but demand for a particular stock also affects its share price and in turn its market cap. If people are investing without regard to the underlying performance, it leads to overinflated demand aka a bubble. Might not be a massive issue, just depends on how overinflated it is.
I do not think these arguments hold true: 1. Most investing has always been passive. Even Founder-owners of a company are not gonna sell because their company has had a bad quarter. Same for pension funds or sovereign wealth funds and the like which have been trying to offset risk by averaging the market for a long time. Vanguard just made this accessible to the average investor. 2. In a crash, who is more likely to make the crash worse by panic selling - a passive investor who looks into his stock portfolio once a year, or an active investor trying to beat the market daytrading single stocks with leverage? 3. When the value of a position in an index goes up, the index fund does not have to make new purchases of that stock. They already hold it, and its value increased according to its value share in the index. I am only worried about companies entering and leaving the index. Someone may be able to acquire a large position in an out-of-index company, pushing it into the index. Then funds need to buy the stock to reflect the index, pushing the price further. Then the original investor can sell at the inflated price, dropping the company out of the index. Funds have to sell at dropped prices. Rinse/repeat.
I love your last point man. Is there something that I’m missing. Why don’t people look to invest in a company that the big 3 might have to buy a large large large portion of to satisfy the conditions of the top 500 companies. Any idea how often companies enter and leave the top 500. Also I just thought of this. It’s likely the big 3 own shares in all companies within striking distance of the top 500 for that reason.
yes it has been a subject for years. it is indeed a risk. an ETF is essentially a derivative, as it's built on a basket of other stocks. there is always a risk in derivative products. so far, all is good.
I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.
I think the next big thing will be A.I. For enduring growth akin to META, it's vital to avoid impulsive decisions driven by short-term fluctuations. Prioritize patience and a long-term perspective most importantly consider financial advisory for informed buying and selling decisions.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
'Laurelyn Gross Pohlmeier' a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
If index funds “irrationally” holding up prices, why TSLA, Nvda etc would suddenly drop 5-10 ? And FB dropped 50% after it became META? A humble question looking for answers
check out some of the research on index effects - the math says that the largest stocks will get larger, due to the concentrated effects of index inflows. Also check out how index funds use derivatives to avoid creating market effects. For those with the courage to ask the question, it turns out that indexing is a good idea, but it has some surprising risks. Of course, the index true believers think that indexing is a free lunch...
always thought about this. maybe the drops come from sell-off from active managers. other asset managers (like those managing assets of an insurer) have liabilities to manage and have different criteria for assets e.g a limit on volatility. this question definitely needs further investigation.
Passive investing bubbles arguments can be applied to bank saving accounts: basically everyone who is not a investing guru investing in something “safe” creates a “bubble”
Indeed. I was reading an old book from Peter Lynch recently. While the book was several decades old, Peter Lynch talked about how investment professionals were concerned about a mutual fund bubble and too many people putting too much money into passive mutual funds (this was before index funds really became a big thing). So yeah, these people have been crying wolf for decades now about this non-existent problem.
1) The passive investors aren't setting the price. It's the active investors. 2) If there is a passive investing bubble, it's a great opportunity for active investors (such as Burry) to make some cash and get prices back to the proper level. If you are continually buying, then these ebbs and flows are to be expected and totally fine. 3) Most people also diversify into international and small/mid cap so the concentration which diversifies beyond the magnificent 7. Also these companies have incredible profits and have had a long record of great growth despite being continually labeled as too expensive. If you had stayed out of these companies, you would have missed out on a great run over the past 2 decades. 4) This weighting of the top 10 companies is not wildly different than throughout history of the S&P500.
incorrect, the passives MUST purchase each time money flows in. you should look into how much stock purchases are driven by so-called passive inflows. passive funds are passive only in decision making, they are very active in price setting
@@Questionsabout-yv1ks As he pointed out the vast majority of the trades within passive index funds are within the secondary market. Also there have been several studies that show it takes very little active trading to set the price. Also again, if prices are severely distorted, it's a great opportunity for an active investor to come in and make a ton of money.
@@TheBlackMage3 Not really, because the inflated value from passive investors isn't going to go away. Active investors cannot capitalise on the deviation from true value because there is no deviation. The speculation term that the passive inflows create is genuine value. It would be like trying to short dollars because they have no intrinsic value, and their value comes from people being prepared to trade with them. That's all true, but while people are prepared to trade with them they retain their value. Active investors will manage the price to reflect all terms, including the projected grown in share price from the passive investor term. If the passive investment market is expected to grow, then those stocks will be expected to grow, despite being functionally unrelated. It introduces a feedback term, and this feedback term is getting quite big. The challenge with bubbles is that there is no way to make money off one until it bursts, and predicting when that will happen is extremely difficult.
The first 3 comments I read were bots. Some specific person helped the bot earn unrealistic returns. Another bot is really interested in getting help from this person. These are all over finance videos.
Additional earnings reports from major tech companies, driven by Nvidia, coupled with trader FOMO, could fuel a resurgence in market buying pressure. I'm considering investing over $300k, but I'm uncertain about risk mitigation strategies.
The strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.
Risk mitigation is a crucial consideration before embarking on investments. Certified Financial Advisors (CFAs) excel in this area, often undersold until investors learn the hard way. I speak from experience.
Rebecca Noblett Roberts is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment,
So Burry is bitching because passive buying and holding helps to maintain a price point but will inflate future prices due to reduced supply of that stock. Basically, he's complaining that there is less available for him to churn or to short because he can't\won't knock on a gazillion doors asking to borrow your stocks so he can sell them to devalue them and then buy them back and pocket the profit while you "benefit" from a few pennies per share and a devalued portfolio. Tough shit Michael
@@michaelegerszegi4261why are u not a fan of index investing? I understand if u are exception on the rule with active managers like buffer or peter lynch then thats great. But for 99% of people index in say sp500 is superb decision for longterm investing
Passive investors won't jam the fire doors because they are passive. They'll just shrug and keep working and buy the lows. Most of my friends and family are passive investors and they would never buy individual securities.--even APPL or NVDA.
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks.
@@Kai-p2g How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
@@Kai-p2g How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
We're on the 10th inning, could it go on further? Hell yes. Are we at the end of this cycle? Hell yes. Can we guess if it will end at the 11th inning? Helll no. Do the Math buddy.
I Hit 110k today. Thank you for all the knowledge and nuggets you had thrown my way over the last months. Started last month 2024. Financial education is indeed required for more than 70% of the society in the country as very few are literate on the subject. thanks to Brooke Miller for helping me achieve this
She is my family's personal broker and also a personal broker in many families I'm United States, she's a licensed broker and a FINRA AGENT in United states
I just withdrew my profits a week ago, To be honest it was an amazing feeling when the profits hits my wallet I wish I could reinvest but, too much bills
they are not complaining, they are pointing out that the mindless autopilot buying by passives creates rigid markets. Trees do not grow to the sky, the day will come when passive's inherent flaws will play out. I use passive myself, but my finger is always near the "sell" button.
All that will happen if most people were to hold index funds, is that active management will outperform. Once that happens people will sell out of index funds and go into active management and index funds will outperform once again. This will unlikely happen in general as long as most people are stock pickers. Investing has been solved and its really as simple as holding the index, but yet people STILL stock pick and underperform.
only that active fonds never outperform for more then like 2 or 3 years due to it beeing random. The only somewhat successfull aktive fonds are those that hug an index and trim of the fat by excluding some of the obviously weak companies still in the index.
That is impossible. By construction the passive investors portfolio is the average of active investors portfolios. Since the former pays lower fees than the latter, passive investing will always outperform the average of active investors.
The mag 7 may or may not be overvalued. If they are overvalued their valuations may or may not stretch. The market could crash or keep going up. Missing out on the best days of the market, and trying to time out will lead u to having significantly less gains over time. Just dollar cost averaging into the s&p 500 as well as a little in a total international index will greatly increase your returns over time.
I had a bad relationship with debt for a long time and couldn’t really put my focus on saving to benefit with compounding from Index funds. After some research, I found a strategy that worked for me, I’m now debt-free and retiring with at least $5 million. Just sharing my experience, everyone's path is different
In my experience, luck plays a part, especially in the short term. But I’ve noticed that when results remain consistent, it usually indicates something more than just luck. For me, research was the real challenge until I came across Emily Ava Milligan, a fund manager. Her strategy made sense to me and contributed to growing $400k into this and counting
In my experience, luck plays a part, especially in the short term. But I’ve noticed that when results remain consistent, it usually indicates something more than just luck. Research was the real challenge until I came across Emily Ava Milligan, a fund manager. Her strategy made sense to me and contributed to growing $400k into this and counting
In my experience, luck plays a part, especially in the short term. But I’ve noticed that when results remain consistent, it usually indicates something more than just luck. For me, research was the challenge until It led to Emily Ava Milligan, a fund manager. I thought her strategy made sense, it contributed to growing 400k into this and counting
Who is actually using share owner power towards the company? Vanguard, BlackRock? Where those investor money actually goes when putting money to synthetic ETF? Does this give intensive to get small company fast to be included S&P500? Distortion of free competition?
@@omonkkonen6676 I’m not sure where that money goes, exactly. It’s just fundamentally wrong for an index to be propped up this much by a handful of companies. When only 7 companies have shown significant growth compared to the rest of the index (who’s growth has been declining), it’s a very clear sign of a bubble of some sort. It’s not productive, therefore it’s not viable in the long term.
I wanted to revisit the idea in 2024 with all that's going on in the Mag-7, but you're correct, I have covered Michael Burry's thesis when he first came out with it :)
You were saying this like 5 years ago - if we listened to your doomsaying you would have missed out on an incredible bull run. Why? Because you’re afraid of a 30% etf price drop?
Your video suggests that mega stocks are severely overvalued, which I find confusing. For example, Microsoft (MSFT) has a P/E ratio of 39, with $211B in revenue and $72B in net income. These numbers don’t indicate a bubble to me. Did I misunderstand the message of your video?
Bingo. There’s a correction coming, but to think it’s happening with 5/7 of the bigs is simply ludicrous and shows whoever is saying that has no idea how those companies got that large and stayed that way for that long.
Agree. Also the index has a much better chance of climbing back after a correction than some individual stock that got whacked and now has to turn its fortunes around, fire ceo etc etc etc
@@John-ou5bc sorry just cuz you make an analogy doesn’t make Tesla Mag 7. TSLA is down 8% on the year while BRK is up 20% and with a much larger market cap
I disagree, an index brings security to a stock. There would also have to be significant lowering of demand for the index’s to crash badly. There’s stable demand as people buy into the index’s every week.
@@yeetboi268 yes I was simply saying why I disagree with Michael burry😂why is that a problem? Also I’m using the argument for the opposite reason mentioned in the video, the video says that blind buying is bad. I’m technically saying blind buying provides lots of stability.
@@thesig301 I see, you're the kind of person who prioritizes performance over safety. Given that, I don't expect you to understand. I can only wish that you will make enough money so that one day, when your AUM is large enough, you will understand.
This is the best time to be an active investor as passive investments have crossed one 50%. The biggest issue with passive investing right now is the valuations of stocks that are part of market-cap weighted index.
That may be true, but common sense implies that fund manager can sense that move and shuffle the portfolio elsewhere so the risk for the fund is not nearly as big as to the individual investor.
if m7 companies drop 50% doesn't S&P500 ETF get rebalanced ? i.e. - less shares of those companies, and more of others ? So in the end it's not 15%, but much less than that ?
Thanks for the video. But based on the fundamentals of passive investing that Warren Buffet, Jack Bogle, and others have fortunately shared, this crash would only be beneficial to those who are committed to “staying the course.” This is because if the index fund bubble does pop, it will be a great opportunity to buy them ‘on sale’ assuming one has cash available. So while yes the market is setting up to pop at some point, I would argue that it’s only natural/unavoidable - history tells us this. And until passive investors choose to actively research stocks to invest in, I think passive investing will be the way to go - as long as one can stay the course :)
@@yeetboi268 I don’t really understand your question but I don’t think investing is a Ponzi scheme. Investing and speculation are very, very different, and bubbles are a natural course of the economic cycle. The real question - as an investor - is if you are willing and able to be conservative in good times so that you can be aggressive and opportunistic in bad times. If you read Devil Take The Hindmost by Edward Chancellor and The Great Depression: A Diary by Benjamin Roth you will be able to understand my position more clearly. Cheers!
Agree, all the people in here fretting about a correction in the index don't get it. Passive investing doesn't just mean not picking individual stocks it also means long term buy and hold and not trying to time market conditions nor sell when the market inevitably corrects.
So a few people would lose trillions while the vast majority of passive investors would lose 16% if the s&p grows 10% a year on average those passive investors would need 1 1/2 years to regain their losses.
I wonder if these index funds are still voting as shareholders. I'm inclined to think this should be regulated. They might have too much power, and they might be responsible for some political and cultural problems e.g. (Disney).
1:24 - you might wanna take a quick look at your X axis. Personally, I'm not too worried about the year 3000. We'll all be fighting for water anyhow...
My 2 cents. If your investment window is long enough (20+ years), it doesn't matter. You'll DCA your way to a lower average price and eventually you'll be in the green even if the market is bleeding, at that point you just made it. You cannot say the same about stocks, you have the certainty that the overall US market will go up, even if it doesn't break its ATH, but a stock could be in a perma decline until it fills bankruptcy. That's why you don't pick single stocks.
4:02 Isn't this false? Thought you'd done a video in the past that explained that it used to be more concentrated in the past. Or maybe another finance YTer.
Ah yes, good old Michael "a broken clock is right twice a day" Burry. So the 'risk' with index ETF's is the index itself and in particualr the S&P is currently top-heavy with 7 companies and we're due a correction? That's how it's always been. Hell, Nvida is very new to the party, the "Magnificent 7" used to be FANNG not 3 years ago. In 2000 Walmart was the 3rd largest company in the index, it hasn't reached those lofty heights in the last 20 years and it's now just outside the top 20, but if you'd held just that stock since 2016 you'd be up nearly 300%. When one of these "top-heavy" over-valued companies eventually bow out another one of the 493 companies are ready and waiting to take its place. Likewise just because a company see's a correction in is price doesn't make it a bad pick. I think the one take-away is for the average joe retail investor don't just throw your entire nest egg into a single asset class and diversify.
It's funny that literally two videos ago you were advocating so hard for DCA, and now telling us how it's breaking the market. Not to say both of those things aren't true
Two counter arguments. 1. Some passive investors are buying but others are selling. Think of it like the pension system some people are receiving pension while others are still working. 2. If passive investors are really passive then even if there is a bubble they will be buying and selling at the same rate as usual. And one more thought... In a crash value investors would be buying, not running for the exit. The theater is not on fire, the popcorn are on sale 😜
I see three possible movements: 1. The "smart" passive investors who form the bulk of the SIP inflows into these index funds would exit in waves at some time in the future, triggering a collapse where most layman index investors would be trapped leaving to sudden fall of prices and triggering the chain reaction needed for deep correction. 2. Inflation catches up and moves above the S&P 500 returns, essentially leading to same equation. Not investing in 2010- early 2020s would become equal to investing in index fund in late 2020s - early 2030s. 3. Split down and eventual return to normal. People will start to gravitate towards other lucrative funds leading to drop in inflows and high churn. This will lead to better price discoveries and corrections. Put simply, index fund managers would have to behave like active fund managers to retain the business.
@@shaunjames2221 he explained that the stock price is determined by the active investors, not by the passive ones. The active investors haven't been giving a solitary fuck about earnings for years now, especially not in tech. Nvidia and Tesla prices are certainly not based on silly things like earnings or fundamentals.
@@jeronimo196 We are in Stagflation. My brother works in oe of teh top3 investment bank as an AVP, he said last week, a couple of the guys from the fed came over to his office meeting with his boss and others in similar positions for 1 hour meeting. After the meeting his boss told him they will drop the interset rate in late august then 1 after the election to boost the markets. His boss told him to keep hus hush about this
the crash will be instigated by the trigger happy hedge funds. Dollar cost averagers appreciate a price drop because they can buy more of the share for the same price. They are less likely to panick sell
The thing people seem to fail to see is that the vast majority of retail investors with a long term mindest would make almost the same purchases in their own if they couldn't use ETF's.
Saying that the Mag 7 is overvalued definitely is just fear mongering. Some of them are moat likely overvalued but on a forward basis, some of them are likely fair to undervalued. People shouting these companies were overvalued for years but their earnings keep justifying those valuations time and time again.
compared to their price changes, the p/e multiple has only barely increased, AAPL has been around a 30 p/e for more than a decade, they just really have grown their earnings. NVDA forward p/e is 40, so maybe that's a little hot, but MSFT has maintained a forward p/e of 40ish for multiple years now. Stock prices really are about earnings, and then supply and demand forces are a second-order effect after that.
Could you do a video to help us understand current vs historic P/E ratios. Also a video about John C. Bogle's comments on diminishing returns from index funds in the coming decades.
The population age demographics is important too. If most people are over retirement age in the population there will be a net selling of ETFs as they use up their retirement. With less young people to buy them.
Given the current volatility in the stock market, I believe investors should divert their attention to lesser-known stocks. With 35% of my $270k portfolio invested in stocks that have sharply declined from their previously high status, I find myself at a loss on how to proceed, feeling overwhelmed by the situation.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert
Many people minimise the importance of advisors until they become overwhelmed by their own feelings. I needed a big boost to keep my firm afloat following my protracted divorce, so a few summers ago, I looked for licenced advisors and found someone with the highest qualifications. She has contributed to my reserve increasing from $275k to $850K despite inflation.
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?.
Or... ETF are giving People an easy access to the market that they didnt have before via apps, lower costs etc... and the growth of ETF is just retail clients finally joining in ?
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Do you still have a sharesight deal? It is time to up my game.
@@robsalvv5853 I do, thanks for considering me :)
It's sharesight.com/newmoney
@@NewMoneyRUclipshey guys, there are couple of sneaky scammers in the comment section. It would be nice to delete these comments.
Active managers complaning about passive investing. Nothing new.
Hahahaha true. Even if they get lucky and break even, the fees alone would mean you are behind.
Especially, given that overall with passive investing, I save LOTS of money over time re tax efficiency AND better overall performance.
Guys like this just want clicks -- they're not AT ALL credible.
shallow people being shallow. nothing new.
@@rogergeyer9851 lots of academic research disagrees. passive is overbought, but is a religion now and people get triggered hard when it is questioned
@@Questionsabout-yv1ks Lots more professional research shows active investors are on average no better than passive ones.
Look at it this way. There is no perfect strategy. Bubble or not. Index/ETF investing is still the best option for the average joe. We don't get paid to sit around and analyse balance sheets 8 hours a day. For the common man index investing is still the best option!
You are correct and worst of all as he said most of them are terrible at it. I worked at Morgan Stanley in an active management part of the business. Most if not all of our active managers were not beating the index. I got shot down when I mentioned this. Passive management is a dirty word.
I feel this video has overplayed the issue. Whilst he’s correct regarding the s&p500, the issue on the vast majority of other etfs is non-existent
@@shiftykiwiofcourse u got shot down. Its like u said smoking is bad whilst working for marlboro. People dont like seeing the truth when their income depends on NOT seeing the truth
Scumbags live off AUM and not performance gotten.
I have spoken to 8 best i vestor firms and none could beat me (sp500 index) over any period of time. Trust me, they were NOT happy with me telling them this
it's the best option until it isn't.
@@PeterParker-wj3cr why are my posts being removed?
so true.
If 7 of the biggest companies in the world dropped FIFTY % the index would only go down 16%? Seems like a good result.
If the AI bubble explode, a supposly diversified index, with 500 companies in every profitable sector, will go down 16%. And that is not comting the people in the ETF that will sell there share when it goes down 10 or 15%. The problem is the influence of a single sector on the ETF, espaccialy when this sector is so hard goes all in in the unkowned
But wasn't that already happening in 2007 or any other time some sector had a too large share? @@Dark_Oopa
Exactly. Wtf this guy is fudging about
In the case that the Magnificent Seven goes down 50%, you probably have the rest of the S&P 500 crashing too.
Exactly, seems like a great result. If you can't stomach a 16% loss in the short term, then you probably shouldn't be invested in the market.
I have 35% of my capital investments in an IRA, 25% in index funds, and the balance spread across other investment accts totalling over $250k. I took a big hit in Q4, 2023. Right now i am just looking for ways to recover in 2024.
There are a lot of strategies to make tongue-wetting profit especially in this down market, but such sophisticated trades can only be carried out by proper market experts
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $$275k to $850K...
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
My CFA Annette Christine Conte a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.
If it drops 15% buy the dip =D
Yeah my strategy has been passive DCA, but stop when it gets frothy and then restart when we're in a downturn
The Reddit strategy lol. You wouldn't even bother understanding why it dropped, would you?
@@will4417 Tbh if we're talking about index funds yeah that's unnecessary and maybe not even feasible
@@sauercrowder If you put money into anything just because it's been going up, then that's called recency bias. The US has revived a dead horse in the past by throwing cash at the economy, but just like PE ratios, national debt can't grow to infinity. This isn't sustainable.
@@will4417 You're literally watching a video about the fact that people are continuously adding more and more of their money to the market. There is no reason to believe the next correction will somehow be permanent, and if it is you've got bigger problems.
"Buy the dip" is bad advice, sure, but if you're still investing passively and intending to hold for a long time, there is really nothing wrong a strategy of buying more aggressively after a downturn. It just angers people like you because you think you're smarter than that and that there should be justice in the market where your overthinking is more profitable than someone else's dead simple investing strategy and discipline.
Your big crash has been looming since 2020, 2021, 2022, 2023, 2024.....
Same as Michael Burry ...or Chicken "Genius" Singapore 😂
Still looming
To be fair the market has never seen a global pandemic. Everything I learned in college about finance is not happening. Inverted yield curve, interest rates rising, more demand for bonds… yet there has been no negative price action in the market. Nothing makes sense and I refuse to employ my money into the markets today. I still think it’s a bubble and I’m firm on my stance. There will be a crash.
Agree. Technically, late '21 through late '22 was a bit of a crash, but it bounced back just fine
You nailed it!!! True
It's not a bubble. It's that there is so much debt in the system, central banks have to monetize the debt to keep the system from collapsing. All that's happening is global liquidity is rising like 8-10% per year and it's repricing the price of scarce assets via currency debasement. Basically if you divide SPY or VOO by the Federal Reserve balance sheet, the market has been flat since 2008. I mean you can stop passively investing because you think it's a bubble. But if that bubble bursts then even your cash sitting on some bank's computer system or in a stable value fund in a 401k is going to get confiscated by the banks to back stop a systemic collapse. That happened in Greece over a decade ago. So it's safer to just leave it in the market. You're more at risk of being left behind by currency debasement than you are of a 80% collapse of the SPY.
That is a reasonable argument. Stocks may be a good hedge against inflation. But if you are worried about inflation gold and gold stocks might be a better choice.
i agree. hahahah everytime market prices rises its a Bubble and if it fall its recession.. fking wanabe wallstreet utubers.
@@fsaldan1This is why I've spread my portfolio to include gold. It's my second largest holding.
"They are invested into not because of business performance, but simply because they are in an index" Yes, but why are they in the index? Probably because of business performance(checked by the index provider), so there is no problem after all, I guess?
exactly my thought
Not really. The index is like a tape measure, and only measures one thing - market cap. It doesn't measure fundamental performance. And there are different measures like the S&P 500 Equal Weight Index. You don't know which one is telling the truth do you? That's why you have to know which index doesn't provide misleading results. Do it's time to brush up on your understanding of how indices can be constructed to polish poop.
@@CuriousCrow-mp4cx "only measures one thing - market cap. It doesn't measure fundamental performance."
Yes, but fundamental performance (or estimation and prediction of it by active market participants) affect the stock price and thus also the market cap and share in the index.
Yeah these idiot utubers thinks its the same 500 compies forever
@@seneca983 Yes but demand for a particular stock also affects its share price and in turn its market cap. If people are investing without regard to the underlying performance, it leads to overinflated demand aka a bubble. Might not be a massive issue, just depends on how overinflated it is.
I do not think these arguments hold true:
1. Most investing has always been passive. Even Founder-owners of a company are not gonna sell because their company has had a bad quarter. Same for pension funds or sovereign wealth funds and the like which have been trying to offset risk by averaging the market for a long time. Vanguard just made this accessible to the average investor.
2. In a crash, who is more likely to make the crash worse by panic selling - a passive investor who looks into his stock portfolio once a year, or an active investor trying to beat the market daytrading single stocks with leverage?
3. When the value of a position in an index goes up, the index fund does not have to make new purchases of that stock. They already hold it, and its value increased according to its value share in the index.
I am only worried about companies entering and leaving the index. Someone may be able to acquire a large position in an out-of-index company, pushing it into the index. Then funds need to buy the stock to reflect the index, pushing the price further. Then the original investor can sell at the inflated price, dropping the company out of the index. Funds have to sell at dropped prices. Rinse/repeat.
I love your last point man. Is there something that I’m missing. Why don’t people look to invest in a company that the big 3 might have to buy a large large large portion of to satisfy the conditions of the top 500 companies. Any idea how often companies enter and leave the top 500. Also I just thought of this. It’s likely the big 3 own shares in all companies within striking distance of the top 500 for that reason.
Burry wrote that in 2022, it's now 2024, so not last year. Things change over two years.
Yes, my bad - I did say the wrong thing there. My apologies!
This is nothing new, I've heard the same thing 5 yrs ago. And now
yes it has been a subject for years. it is indeed a risk. an ETF is essentially a derivative, as it's built on a basket of other stocks. there is always a risk in derivative products. so far, all is good.
I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.
I think the next big thing will be A.I. For enduring growth akin to META, it's vital to avoid impulsive decisions driven by short-term fluctuations. Prioritize patience and a long-term perspective most importantly consider financial advisory for informed buying and selling decisions.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
'Laurelyn Gross Pohlmeier' a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
@@Bako-b8j she won't get back to you soon, as you're a bot.
the biggest companies in the US drop by 50% and i only lose 16%? that sounds really well hedged to me.
Also look at the top S&P companies 20 years ago. Completely different but the index still up the to the right. Next
^^ dude in the video even said S&P has had a return of 10% (since 1957) and there’s been many of bubbles and whatnot
Stay calm and keep buying.
If index funds “irrationally” holding up prices, why TSLA, Nvda etc would suddenly drop 5-10 ? And FB dropped 50% after it became META? A humble question looking for answers
check out some of the research on index effects - the math says that the largest stocks will get larger, due to the concentrated effects of index inflows. Also check out how index funds use derivatives to avoid creating market effects. For those with the courage to ask the question, it turns out that indexing is a good idea, but it has some surprising risks.
Of course, the index true believers think that indexing is a free lunch...
always thought about this. maybe the drops come from sell-off from active managers. other asset managers (like those managing assets of an insurer) have liabilities to manage and have different criteria for assets e.g a limit on volatility. this question definitely needs further investigation.
The answer is because prices were being held irrationally high. Duh.
Passive investing bubbles arguments can be applied to bank saving accounts: basically everyone who is not a investing guru investing in something “safe” creates a “bubble”
people have been talking about index fund bubble for years now, but very few people ever get rich by predicting a crash.
you are correct. i have been worried about the construct of ETFs since 2018. haha. they are risky. no doubt about it.
Indeed. I was reading an old book from Peter Lynch recently. While the book was several decades old, Peter Lynch talked about how investment professionals were concerned about a mutual fund bubble and too many people putting too much money into passive mutual funds (this was before index funds really became a big thing). So yeah, these people have been crying wolf for decades now about this non-existent problem.
I agree with you there, Simon!
1) The passive investors aren't setting the price. It's the active investors.
2) If there is a passive investing bubble, it's a great opportunity for active investors (such as Burry) to make some cash and get prices back to the proper level. If you are continually buying, then these ebbs and flows are to be expected and totally fine.
3) Most people also diversify into international and small/mid cap so the concentration which diversifies beyond the magnificent 7. Also these companies have incredible profits and have had a long record of great growth despite being continually labeled as too expensive. If you had stayed out of these companies, you would have missed out on a great run over the past 2 decades.
4) This weighting of the top 10 companies is not wildly different than throughout history of the S&P500.
incorrect, the passives MUST purchase each time money flows in. you should look into how much stock purchases are driven by so-called passive inflows. passive funds are passive only in decision making, they are very active in price setting
@@Questionsabout-yv1ks As he pointed out the vast majority of the trades within passive index funds are within the secondary market. Also there have been several studies that show it takes very little active trading to set the price. Also again, if prices are severely distorted, it's a great opportunity for an active investor to come in and make a ton of money.
@@TheBlackMage3 Not really, because the inflated value from passive investors isn't going to go away. Active investors cannot capitalise on the deviation from true value because there is no deviation. The speculation term that the passive inflows create is genuine value. It would be like trying to short dollars because they have no intrinsic value, and their value comes from people being prepared to trade with them. That's all true, but while people are prepared to trade with them they retain their value.
Active investors will manage the price to reflect all terms, including the projected grown in share price from the passive investor term. If the passive investment market is expected to grow, then those stocks will be expected to grow, despite being functionally unrelated. It introduces a feedback term, and this feedback term is getting quite big.
The challenge with bubbles is that there is no way to make money off one until it bursts, and predicting when that will happen is extremely difficult.
The first 3 comments I read were bots. Some specific person helped the bot earn unrealistic returns. Another bot is really interested in getting help from this person. These are all over finance videos.
Additional earnings reports from major tech companies, driven by Nvidia, coupled with trader FOMO, could fuel a resurgence in market buying pressure. I'm considering investing over $300k, but I'm uncertain about risk mitigation strategies.
The strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skillset/knowledge to pull such trades off.
Risk mitigation is a crucial consideration before embarking on investments. Certified Financial Advisors (CFAs) excel in this area, often undersold until investors learn the hard way. I speak from experience.
Mind if I ask you to recommend this particular coach you using their service?
Rebecca Noblett Roberts is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment,
She appears to be well-educated and well-read. I ran a Google search for her name and came across her website; thank you for sharing.
So Burry is bitching because passive buying and holding helps to maintain a price point but will inflate future prices due to reduced supply of that stock.
Basically, he's complaining that there is less available for him to churn or to short because he can't\won't knock on a gazillion doors asking to borrow your stocks so he can sell them to devalue them and then buy them back and pocket the profit while you "benefit" from a few pennies per share and a devalued portfolio. Tough shit Michael
something is wrong with your brain
Exactly. Still not a fan of index investing. But it is effective.
@@michaelegerszegi4261why are u not a fan of index investing? I understand if u are exception on the rule with active managers like buffer or peter lynch then thats great. But for 99% of people index in say sp500 is superb decision for longterm investing
I guess he will find a way
@@michaelegerszegi4261 why arent u exactly fan of indexing?
Passive investors won't jam the fire doors because they are passive. They'll just shrug and keep working and buy the lows. Most of my friends and family are passive investors and they would never buy individual securities.--even APPL or NVDA.
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks.
@@Kai-p2g How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
@@Kai-p2g
How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
How can I participate in this? I sincerely aspire to establish a secure financlal future and am eager to participate. Who is the driving force behind your success?
I just googled her too, turns out she has several convictions for fraud in the past
Omfg this f*** bots again
Michael Burry's tweet from last year (2022). Which year are we now 😅?
We're on the 10th inning, could it go on further? Hell yes. Are we at the end of this cycle? Hell yes. Can we guess if it will end at the 11th inning? Helll no. Do the Math buddy.
haha. good point.
Yeah you're right Sebastian, my brain did glitch out there haha
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She is my family's personal broker and also a personal broker in many families I'm United States, she's a licensed broker and a FINRA AGENT in United states
I'm surprised that you just mentioned and recommended Brooke Miller, I met her at a conference in 2018 and we have been working together ever since.
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@New Money please clean the scam bots chains
Hard to take it seriously when it's active investors complaining about this "probelm". The problem is it's harder for them to be grifters 😂
they are not complaining, they are pointing out that the mindless autopilot buying by passives creates rigid markets.
Trees do not grow to the sky, the day will come when passive's inherent flaws will play out. I use passive myself, but my finger is always near the "sell" button.
@@Questionsabout-yv1ks sure bud, it's just advisors wanting your $$$, but sure.
All that will happen if most people were to hold index funds, is that active management will outperform. Once that happens people will sell out of index funds and go into active management and index funds will outperform once again.
This will unlikely happen in general as long as most people are stock pickers. Investing has been solved and its really as simple as holding the index, but yet people STILL stock pick and underperform.
only that active fonds never outperform for more then like 2 or 3 years due to it beeing random. The only somewhat successfull aktive fonds are those that hug an index and trim of the fat by excluding some of the obviously weak companies still in the index.
That is impossible. By construction the passive investors portfolio is the average of active investors portfolios. Since the former pays lower fees than the latter, passive investing will always outperform the average of active investors.
The mag 7 may or may not be overvalued. If they are overvalued their valuations may or may not stretch. The market could crash or keep going up. Missing out on the best days of the market, and trying to time out will lead u to having significantly less gains over time. Just dollar cost averaging into the s&p 500 as well as a little in a total international index will greatly increase your returns over time.
All the time I save from passive investing, I invest into myself, my career, my family, and my hobbies.
I had a bad relationship with debt for a long time and couldn’t really put my focus on saving to benefit with compounding from Index funds. After some research, I found a strategy that worked for me, I’m now debt-free and retiring with at least $5 million. Just sharing my experience, everyone's path is different
it’s worth noting that luck often plays a significant role in investing, sometimes even more than the resources involved
In my experience, luck plays a part, especially in the short term. But I’ve noticed that when results remain consistent, it usually indicates something more than just luck. For me, research was the real challenge until I came across Emily Ava Milligan, a fund manager. Her strategy made sense to me and contributed to growing $400k into this and counting
In my experience, luck plays a part, especially in the short term. But I’ve noticed that when results remain consistent, it usually indicates something more than just luck. Research was the real challenge until I came across Emily Ava Milligan, a fund manager. Her strategy made sense to me and contributed to growing $400k into this and counting
In my experience, luck plays a part, especially in the short term. But I’ve noticed that when results remain consistent, it usually indicates something more than just luck. For me, research was the challenge until It led to Emily Ava Milligan, a fund manager. I thought her strategy made sense, it contributed to growing 400k into this and counting
I just searched for the name, and her page popped up as a top result. I’m curious to learn more, appreciate you pointing that out
There is a difference between "artificially inflated stock prices" and "irrationally inflated stock prices". Learn it.
If its artificial, it is irrational
How do we know that Vanguard's holdings in Microsoft are all index funds? Doesn't Vanguard also have actively managed funds?
Yes, but to a much lesser degree :)
Does this essentially mean that $13.29T of investment is asleep at the wheel?
YES.
yup, and it means crappy s&p 500 firms can survive a long time as long as they can stay inside the index
Who is actually using share owner power towards the company? Vanguard, BlackRock? Where those investor money actually goes when putting money to synthetic ETF? Does this give intensive to get small company fast to be included S&P500? Distortion of free competition?
@@omonkkonen6676 I’m not sure where that money goes, exactly. It’s just fundamentally wrong for an index to be propped up this much by a handful of companies. When only 7 companies have shown significant growth compared to the rest of the index (who’s growth has been declining), it’s a very clear sign of a bubble of some sort. It’s not productive, therefore it’s not viable in the long term.
If those companies lose 50% of their value, the world economy crashes. Index or no index it will not matter 😂
The stock market isn't the economy
If there isn't any price discovery because of passive investing, then why is the P/E ratio essentially at the long-term average for the past 30 years?
Is this a rerun?
I wanted to revisit the idea in 2024 with all that's going on in the Mag-7, but you're correct, I have covered Michael Burry's thesis when he first came out with it :)
The problem with the 16% fall is that their drop would trigger margin calls and trigger selling in other stocks to cover calls.
You were saying this like 5 years ago - if we listened to your doomsaying you would have missed out on an incredible bull run. Why? Because you’re afraid of a 30% etf price drop?
Agree 100%
No he’s not saying that.
Your video suggests that mega stocks are severely overvalued, which I find confusing. For example, Microsoft (MSFT) has a P/E ratio of 39, with $211B in revenue and $72B in net income. These numbers don’t indicate a bubble to me. Did I misunderstand the message of your video?
Bingo. There’s a correction coming, but to think it’s happening with 5/7 of the bigs is simply ludicrous and shows whoever is saying that has no idea how those companies got that large and stayed that way for that long.
We talk about asset inflation.. The biggest asset inflation seems to be in these few stock and being translated into index funds.
Michael Barry has made a career of his brilliant moves in 2008. But he’s been wrong about literally everything since.
So Mag 7 falls 50% and the index falls 16%…..is that supposed to be an argument for or against passive indexing? 16% drawdown is nothing unless you’re
Agree. Also the index has a much better chance of climbing back after a correction than some individual stock that got whacked and now has to turn its fortunes around, fire ceo etc etc etc
Passive investors use index funds as a sort of bank so when there’s a cash crunch in the investors pockets we may see prices come down.
Tesla isn’t mag 7, Berkshire is bigger
The Sun is bigger too, yet it and Berkshire aren't magnificent seven, unlike Tesla.
@@John-ou5bc sorry just cuz you make an analogy doesn’t make Tesla Mag 7. TSLA is down 8% on the year while BRK is up 20% and with a much larger market cap
@@hoss6981 The mag 7 are seven specific high market cap tech stocks. Just because a fund is large does not mean it is part of the mag 7.
@@hoss6981 xD BRK is mostly apple, I dont see how apple should be accounted twice
I disagree, an index brings security to a stock. There would also have to be significant lowering of demand for the index’s to crash badly. There’s stable demand as people buy into the index’s every week.
Did you watch the video at all? It's literally discussed in the Blind Buying segment.
@@yeetboi268 yes I was simply saying why I disagree with Michael burry😂why is that a problem? Also I’m using the argument for the opposite reason mentioned in the video, the video says that blind buying is bad. I’m technically saying blind buying provides lots of stability.
@@thesig301 I see, you're the kind of person who prioritizes performance over safety. Given that, I don't expect you to understand.
I can only wish that you will make enough money so that one day, when your AUM is large enough, you will understand.
@@yeetboi268 wow you’re so smart and sound like a good person! Pointless conversation
index creates artificial demand for a stock
This is the best time to be an active investor as passive investments have crossed one 50%.
The biggest issue with passive investing right now is the valuations of stocks that are part of market-cap weighted index.
VOO is not passive investing. VT is.
Is there any way to short this passive investing???
That may be true, but common sense implies that fund manager can sense that move and shuffle the portfolio elsewhere so the risk for the fund is not nearly as big as to the individual investor.
if m7 companies drop 50% doesn't S&P500 ETF get rebalanced ? i.e. - less shares of those companies, and more of others ? So in the end it's not 15%, but much less than that ?
Panic will create opportunities, passive investor increase the value of the opportunities.
Lots of Michael Burry's thoughts and comments on this channel.....
Click bait with the guy that wrote SELL in the beginning of 2023, and the rest is history...
Yeah, not so much these days as he keeps pretty quiet. :)
Thanks for the video. But based on the fundamentals of passive investing that Warren Buffet, Jack Bogle, and others have fortunately shared, this crash would only be beneficial to those who are committed to “staying the course.” This is because if the index fund bubble does pop, it will be a great opportunity to buy them ‘on sale’ assuming one has cash available. So while yes the market is setting up to pop at some point, I would argue that it’s only natural/unavoidable - history tells us this. And until passive investors choose to actively research stocks to invest in, I think passive investing will be the way to go - as long as one can stay the course :)
Are you suggesting that investing driven by a Ponzi scheme (blind buying) is acceptable?
@@yeetboi268 I don’t really understand your question but I don’t think investing is a Ponzi scheme. Investing and speculation are very, very different, and bubbles are a natural course of the economic cycle. The real question - as an investor - is if you are willing and able to be conservative in good times so that you can be aggressive and opportunistic in bad times. If you read Devil Take The Hindmost by Edward Chancellor and The Great Depression: A Diary by Benjamin Roth you will be able to understand my position more clearly. Cheers!
Agree, all the people in here fretting about a correction in the index don't get it. Passive investing doesn't just mean not picking individual stocks it also means long term buy and hold and not trying to time market conditions nor sell when the market inevitably corrects.
So you’re telling me that the active fund manager discourages from passive investing, huh? I wonder why that could be
George Constanza starting the video was AMAZING! ❤
But he dont like to discuss figures though
So a few people would lose trillions while the vast majority of passive investors would lose 16% if the s&p grows 10% a year on average those passive investors would need 1 1/2 years to regain their losses.
I wonder if these index funds are still voting as shareholders. I'm inclined to think this should be regulated. They might have too much power, and they might be responsible for some political and cultural problems e.g. (Disney).
1:24 - you might wanna take a quick look at your X axis.
Personally, I'm not too worried about the year 3000. We'll all be fighting for water anyhow...
Very informative. Thank you.
Enjoyed this episode a lot! especially the promotion of your course to invest in ETFs :)
My 2 cents. If your investment window is long enough (20+ years), it doesn't matter. You'll DCA your way to a lower average price and eventually you'll be in the green even if the market is bleeding, at that point you just made it. You cannot say the same about stocks, you have the certainty that the overall US market will go up, even if it doesn't break its ATH, but a stock could be in a perma decline until it fills bankruptcy. That's why you don't pick single stocks.
So...short NVDA? 😅
4:02 Isn't this false? Thought you'd done a video in the past that explained that it used to be more concentrated in the past. Or maybe another finance YTer.
Passive investors will NOT trade or sell the stock, which creates stability on the stock market a.k.a. in the stocks they hold!
"Don't worry about it..."
ha ha!
16% drop? That’s hardly a crash. Thats a minor blip, hold hold.
Fantastic research here. Good input.
Ah yes, good old Michael "a broken clock is right twice a day" Burry. So the 'risk' with index ETF's is the index itself and in particualr the S&P is currently top-heavy with 7 companies and we're due a correction? That's how it's always been. Hell, Nvida is very new to the party, the "Magnificent 7" used to be FANNG not 3 years ago. In 2000 Walmart was the 3rd largest company in the index, it hasn't reached those lofty heights in the last 20 years and it's now just outside the top 20, but if you'd held just that stock since 2016 you'd be up nearly 300%. When one of these "top-heavy" over-valued companies eventually bow out another one of the 493 companies are ready and waiting to take its place. Likewise just because a company see's a correction in is price doesn't make it a bad pick. I think the one take-away is for the average joe retail investor don't just throw your entire nest egg into a single asset class and diversify.
It's funny that literally two videos ago you were advocating so hard for DCA, and now telling us how it's breaking the market. Not to say both of those things aren't true
Because things are not binary.
@@barybary42and because this guy is a content creator 😂
There’s so many scam bots it’s crazyy
Just a small correction - the S&P is not the 500 biggest companies in the US(or even the 500 biggest publicly traded companies in the US).
Two counter arguments. 1. Some passive investors are buying but others are selling. Think of it like the pension system some people are receiving pension while others are still working. 2. If passive investors are really passive then even if there is a bubble they will be buying and selling at the same rate as usual. And one more thought... In a crash value investors would be buying, not running for the exit. The theater is not on fire, the popcorn are on sale 😜
Great video of fact checking. The bubble of etf is often tuned in the économical medias. Thanks !
Video Editing and animations are incredible !
I see three possible movements:
1. The "smart" passive investors who form the bulk of the SIP inflows into these index funds would exit in waves at some time in the future, triggering a collapse where most layman index investors would be trapped leaving to sudden fall of prices and triggering the chain reaction needed for deep correction.
2. Inflation catches up and moves above the S&P 500 returns, essentially leading to same equation. Not investing in 2010- early 2020s would become equal to investing in index fund in late 2020s - early 2030s.
3. Split down and eventual return to normal. People will start to gravitate towards other lucrative funds leading to drop in inflows and high churn. This will lead to better price discoveries and corrections. Put simply, index fund managers would have to behave like active fund managers to retain the business.
Funny thing is if companies earnings go up they are rewarded if not they are punished so all this talk about bubble is nonsense
So, there has never been a bubble in the history of humanity - just earnings not achieving expectations from time to time.
@@jeronimo196 if you watched the video he explained the difference lol
@@shaunjames2221 he explained that the stock price is determined by the active investors, not by the passive ones.
The active investors haven't been giving a solitary fuck about earnings for years now, especially not in tech. Nvidia and Tesla prices are certainly not based on silly things like earnings or fundamentals.
@jeronimo196 actually that's not true nowadays you see a lot of sell-off before and after earnings- pltr is a great example
@@jeronimo196 We are in Stagflation. My brother works in oe of teh top3 investment bank as an AVP, he said last week, a couple of the guys from the fed came over to his office meeting with his boss and others in similar positions for 1 hour meeting. After the meeting his boss told him they will drop the interset rate in late august then 1 after the election to boost the markets. His boss told him to keep hus hush about this
Love Poor Charlie's Almanach behind you❤
the crash will be instigated by the trigger happy hedge funds. Dollar cost averagers appreciate a price drop because they can buy more of the share for the same price. They are less likely to panick sell
I think indexes use weighted average to avoid the problem video is pointing out.
The thing people seem to fail to see is that the vast majority of retail investors with a long term mindest would make almost the same purchases in their own if they couldn't use ETF's.
Nice content!! New subscribers!
Saying that the Mag 7 is overvalued definitely is just fear mongering. Some of them are moat likely overvalued but on a forward basis, some of them are likely fair to undervalued. People shouting these companies were overvalued for years but their earnings keep justifying those valuations time and time again.
compared to their price changes, the p/e multiple has only barely increased, AAPL has been around a 30 p/e for more than a decade, they just really have grown their earnings. NVDA forward p/e is 40, so maybe that's a little hot, but MSFT has maintained a forward p/e of 40ish for multiple years now. Stock prices really are about earnings, and then supply and demand forces are a second-order effect after that.
Yes s&p being by far the most top heavy in history means absolutely nothing. Thanks for your genius input
Could you do a video to help us understand current vs historic P/E ratios. Also a video about John C. Bogle's comments on diminishing returns from index funds in the coming decades.
You need to use a Log scale for prices
I was going to call bullshit at first, but this is actually interesting.
The other issue is even active management funds still buy the same stocks as the passive funds because they are the best performers.
The best financial content on RUclips. I actually learn something every time I watch!
So wouldn't that eventually equalize the market so it's easier for active investors to identify undervalued stocks?
The population age demographics is important too. If most people are over retirement age in the population there will be a net selling of ETFs as they use up their retirement. With less young people to buy them.
Given the current volatility in the stock market, I believe investors should divert their attention to lesser-known stocks. With 35% of my $270k portfolio invested in stocks that have sharply declined from their previously high status, I find myself at a loss on how to proceed, feeling overwhelmed by the situation.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert
Many people minimise the importance of advisors until they become overwhelmed by their own feelings. I needed a big boost to keep my firm afloat following my protracted divorce, so a few summers ago, I looked for licenced advisors and found someone with the highest qualifications. She has contributed to my reserve increasing from $275k to $850K despite inflation.
How can I participate in this? I sincerely aspire to establish a secure financial future and am eager to participate. Who is the driving force behind your success?.
Actually it’s a Lady. Yes my go to person is a ’Melissa Jean Talingdan”. So easy and compassionate Lady. You should take a look at her work.
Thank you for this amazing tip. I just looked the name up and wrote her
up, to schedule a call. many thanks
the famous broken clock
Basically big tech is in a bubble.
Great vid. Thank you.
When you predict 20 recessions of the last 1 recession
And its still going up😮
Your love for Burry runs deep
Or... ETF are giving People an easy access to the market that they didnt have before via apps, lower costs etc... and the growth of ETF is just retail clients finally joining in ?