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re: Michael Burry calls passive investments/index funds a bubble
Posted on 9/6/19 at 12:32 pm to barry
Posted on 9/6/19 at 12:32 pm to barry
Would another way to say it be that these potentially overvalued, low price/volume stocks are being marked to an inefficient market? And, once the market becomes more efficient, their true, lower values will suddenly be recognized in the total value of these funds.
1
Posted on 9/6/19 at 3:58 pm to Oizers
Yep. These indexes are reconstructed every so often, maybe 1-4 times per year depending.
As that happens, companies that aren’t growing relative to the markets will make up smaller allocations within the ETF index themselves.
A problem with ETFs may come when one sector makes up far too much of the index. Think tech bubble circa 2000 when tech made up over 30% of the SP500. You would have been too exposed to a bubble asset.
Those excesses aren’t here to those extremes. At least not today.
As that happens, companies that aren’t growing relative to the markets will make up smaller allocations within the ETF index themselves.
A problem with ETFs may come when one sector makes up far too much of the index. Think tech bubble circa 2000 when tech made up over 30% of the SP500. You would have been too exposed to a bubble asset.
Those excesses aren’t here to those extremes. At least not today.
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