Alright,
I am a relatively new student of the markets and investing. I've found this board to be a great resource. I've read a handful of books(thanks for the suggestions by the way), and done quite a bit of online reading.
I think I "get" the idea that there "is no free lunch." I buy the whole market efficiency idea. I also understand that most of us opt for the indexes (at least on large cap, mathj) to ensure that we realize market returns. The drag of management expenses results in performance that most often trails the benchmarks. Got it. There are so many people studying these companies that it's all in today's price.
My question is how the markets would be affected if a large majority of investors worked the way "we" do? What if all investors refused to pay the ER that accompanies the managed funds? If there was no one paying all those "chimps", as Bernstein calls them, it seems they would lose some of that efficiency. If I understand it right, there are more managed funds out there than stocks for them to buy. With all those funds employing analysts, it seems that the managed funds are a necessary part of the efficiency puzzle. Us DIYers are benefitting on the backs of the uninformed masses that are buying the Street's hype. What if education gets to every investor and no one is willing to pay for management anymore?
I realize I'm speaking in universals here that will never happen. I know there are indexes available in every 401k and the like. Clearly, Vanguard and Fidelity and many others have millions of clients investing in indexes. They're no secret. I'm also certain that there must be some dynamic of the market that I've left out due to ignorance. Then again, that's why I'm here. How do it work?? Is the managed fund a critical piece of the efficient market?
devo
O0
I am a relatively new student of the markets and investing. I've found this board to be a great resource. I've read a handful of books(thanks for the suggestions by the way), and done quite a bit of online reading.
I think I "get" the idea that there "is no free lunch." I buy the whole market efficiency idea. I also understand that most of us opt for the indexes (at least on large cap, mathj) to ensure that we realize market returns. The drag of management expenses results in performance that most often trails the benchmarks. Got it. There are so many people studying these companies that it's all in today's price.
My question is how the markets would be affected if a large majority of investors worked the way "we" do? What if all investors refused to pay the ER that accompanies the managed funds? If there was no one paying all those "chimps", as Bernstein calls them, it seems they would lose some of that efficiency. If I understand it right, there are more managed funds out there than stocks for them to buy. With all those funds employing analysts, it seems that the managed funds are a necessary part of the efficiency puzzle. Us DIYers are benefitting on the backs of the uninformed masses that are buying the Street's hype. What if education gets to every investor and no one is willing to pay for management anymore?
I realize I'm speaking in universals here that will never happen. I know there are indexes available in every 401k and the like. Clearly, Vanguard and Fidelity and many others have millions of clients investing in indexes. They're no secret. I'm also certain that there must be some dynamic of the market that I've left out due to ignorance. Then again, that's why I'm here. How do it work?? Is the managed fund a critical piece of the efficient market?
devo
O0