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Any thoughts on this? Honestly as the % increases it becomes more of a ponzi type scheme. New money buys companies for no reason. Prices go up regardless of fundamentals. Etc.
What you describe isn’t a Ponzi scheme. There’s an actual investment, in assets being made
Right, the money is there, but as indexing gets more and more popular it will be even worse. Everything will be bought regardless. Just seems like a recipe for disaster.
Right, the money is there, but as indexing gets more and more popular it will be even worse. Everything will be bought regardless. Just seems like a recipe for disaster.
Just as an FYI, there are enhanced indexes that seek to weed out the trash and then enhanced indexes that strive for a factor.
That being said, I appreciate the long term security indexes provide over a portfolio of individual stocks.
So time to sell out of index funds? What would you put it in?
It's impossible to fight the wave. I really don't have any alternatives. If others are willing to pay high PEs for companies that don't perform, it is what it is.
It will however lead to a huge pop when the economy slows and layoffs happen as less money is put into the system. Those companies propped up with high PEs will fall hard. Just seems to me it could lead to larger up and down cycles in the market.
So time to sell out of index funds? What would you put it in?
morningstar studies show if you just stick to the 20% of funds with the most investor dollars in them (the mega funds ) , your odds of beating indexing run 80% .
i have been doing it for decades with fidelity contra , fidelity blue chip growth , fidelity growth company ....
It's impossible to fight the wave. I really don't have any alternatives. If others are willing to pay high PEs for companies that don't perform, it is what it is.
It will however lead to a huge pop when the economy slows and layoffs happen as less money is put into the system. Those companies propped up with high PEs will fall hard. Just seems to me it could lead to larger up and down cycles in the market.
I dunno. But I don't like it.
High multiple companies can be a death trap.
Another really good metric is to take the yearly sales and divide it into Market Capitalization. 10X sales is usually pretty high, but growth stocks can easily eclipse that.
For those who may not know: Market Capitalization = (Stock Price X Number of Shares). In other words, what it would cost you to buy all the shares in existence.
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