Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Uhhh ... "Matt Lynn is a British thriller writer and a financial journalist. As Matt Lynn, he is the author of the 'Death Force' series of novels."
Which might explain his challenged logic: "As the trackers and ETFs take over, it will be possible to beat the market, and probably fairly easy. Why? Because the index funds will be buying blindly, ignoring the obvious winners and losers, and anyone who uses just a modicum of common sense should find that creates lots of opportunities."
"...and probably fairly easy"?
Mr. Lynn assumes that "trackers and ETFs" can be equated with "broad, cap-weighted market index funds." His assumption is incorrect for at least two reasons. First, most ETFs target smaller niches and increasingly the trend is toward non-cap-weighted indexes. Second, most ETFs are trading products used by professional investors to execute - long, leveraged and short - specific active bets. That's why Morningstar's ETF awards are divided into two classes: trading and investing.
1) He thinks he knows which stocks will do better in ex-ante. 2) He thinks he can pick consistently good stocks and not make any mistakes which would erase the advantage in good picks. 3) He is ignoring the fact that index hold many of the so-called good stocks. 4) He is ignoring that cap weighted index will not incorporate those stocks at higher weights as they continue to do better. Thus erasing the momentum effect in past winners.
Comments
Which might explain his challenged logic: "As the trackers and ETFs take over, it will be possible to beat the market, and probably fairly easy. Why? Because the index funds will be buying blindly, ignoring the obvious winners and losers, and anyone who uses just a modicum of common sense should find that creates lots of opportunities."
"...and probably fairly easy"?
Mr. Lynn assumes that "trackers and ETFs" can be equated with "broad, cap-weighted market index funds." His assumption is incorrect for at least two reasons. First, most ETFs target smaller niches and increasingly the trend is toward non-cap-weighted indexes. Second, most ETFs are trading products used by professional investors to execute - long, leveraged and short - specific active bets. That's why Morningstar's ETF awards are divided into two classes: trading and investing.
David
1) He thinks he knows which stocks will do better in ex-ante.
2) He thinks he can pick consistently good stocks and not make any mistakes which would erase the advantage in good picks.
3) He is ignoring the fact that index hold many of the so-called good stocks.
4) He is ignoring that cap weighted index will not incorporate those stocks at higher weights as they continue to do better. Thus erasing the momentum effect in past winners.