The Lemon Fool

Regular readers of the FT will have invariably read articles by Robin Wigglesworth, the FT’s global finance correspondent. During lockdown he took on the task of writing a book on the history of indexing titled “Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever” now out in print.

Recently, Robin Wigglesworth did a near hour-long interview on Morningstar US’s weekly podcast ‘The Long View’ to promote his book. While the names of the early pioneers of indexing are now forgotten, Wigglesworth has some interesting comments regarding Jack Bogle, and his legendary bloody-mindedness.

Pull up a comfortable chair and click here to listen.

+1 rec and also:

That's a superb discussion transcript. Thank you very much for sharing it.

Listening to the book on Audible-great listen but very long and dense
Doing it chapter by chapter with long breaks in between!
xxd09

forrado wrote:Regular readers of the FT will have invariably read articles by Robin Wigglesworth, the FT’s global finance correspondent. During lockdown he took on the task of writing a book on the history of indexing titled “Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever” now out in print.

Recently, Robin Wigglesworth did a near hour-long interview on Morningstar US’s weekly podcast ‘The Long View’ to promote his book. While the names of the early pioneers of indexing are now forgotten, Wigglesworth has some interesting comments regarding Jack Bogle, and his legendary bloody-mindedness.

Pull up a comfortable chair and click here to listen.

Well would you believe? I recommended this book in a post on 30 October particularly for those who are keen on index funds. See my post in the Books and Reading Board. I am surprised that it is out of print. It must have been a very short print run because I cannot imagine that it would have a very large interest base.

If you can find a copy, I recommend buying it if you are interested in investing and in index funds in particular. If it is indeed out of print, well I have a copy. Everything is for sale at a price. Just PM me!

I clearly missed forrado's post

Dod

Dod101 wrote:

forrado wrote:Regular readers of the FT will have invariably read articles by Robin Wigglesworth, the FT’s global finance correspondent. During lockdown he took on the task of writing a book on the history of indexing titled “Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever” now out in print.

Recently, Robin Wigglesworth did a near hour-long interview on Morningstar US’s weekly podcast ‘The Long View’ to promote his book. While the names of the early pioneers of indexing are now forgotten, Wigglesworth has some interesting comments regarding Jack Bogle, and his legendary bloody-mindedness.

Pull up a comfortable chair and click here to listen.

Well would you believe? I recommended this book in a post on 30 October particularly for those who are keen on index funds. See my post in the Books and Reading Board. I am surprised that it is out of print. It must have been a very short print run because I cannot imagine that it would have a very large interest base.

The OP said "now out in print", not "out of". The link provided was to Amazon US but a quick google finds it readily available here, including on Amazon UK.

https://www.amazon.co.uk/Trillions-Renegades-Invented-Changed-Finance/dp/0241422051
https://www.waterstones.com/book/trillions/robin-wigglesworth/9780241422052
https://www.whsmith.co.uk/products/passive-attack-the-story-of-a-wall-street-revolution/robin-wigglesworth/hardback/9780241422052.html

...and many others.

mc2fool wrote:

Dod101 wrote:

forrado wrote:Regular readers of the FT will have invariably read articles by Robin Wigglesworth, the FT’s global finance correspondent. During lockdown he took on the task of writing a book on the history of indexing titled “Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever” now out in print.

Recently, Robin Wigglesworth did a near hour-long interview on Morningstar US’s weekly podcast ‘The Long View’ to promote his book. While the names of the early pioneers of indexing are now forgotten, Wigglesworth has some interesting comments regarding Jack Bogle, and his legendary bloody-mindedness.

Pull up a comfortable chair and click here to listen.

Well would you believe? I recommended this book in a post on 30 October particularly for those who are keen on index funds. See my post in the Books and Reading Board. I am surprised that it is out of print. It must have been a very short print run because I cannot imagine that it would have a very large interest base.

The OP said "now out in print", not "out of". The link provided was to Amazon US but a quick google finds it readily available here, including on Amazon UK.

https://www.amazon.co.uk/Trillions-Renegades-Invented-Changed-Finance/dp/0241422051
https://www.waterstones.com/book/trillions/robin-wigglesworth/9780241422052
https://www.whsmith.co.uk/products/passive-attack-the-story-of-a-wall-street-revolution/robin-wigglesworth/hardback/9780241422052.html

...and many others.

Thanks. I must have read that as a typo. It is an unusual construct. I bought from Amazon UK. Would never think of going to the US site. Do not remember what I paid Amazon but the list price in the book is the more or less standard £25 for the hardback and of course free delivery in about 24 hours.

Dod

Dod

In years to come people will look back and realise that indexing using mkt cap was one of the biggest financial mistakes ever made.

OhNoNotimAgain wrote:In years to come people will look back and realise that indexing using mkt cap was one of the biggest financial mistakes ever made.

If you wanted a measure on how investors on average were faring, are there alternatives? That doesn't have to make replicating a capitalisation weughted index a desirable investment strategy, notwithstanding its popularity.

OhNoNotimAgain wrote:In years to come people will look back and realise that indexing using mkt cap was one of the biggest financial mistakes ever made.

Please could you explain why? Thanks.

RC

ReformedCharacter wrote:

OhNoNotimAgain wrote:In years to come people will look back and realise that indexing using mkt cap was one of the biggest financial mistakes ever made.

Please could you explain why? Thanks.

RC

It misallocates capital.

The clearest example in Tesla which is capitalised at about $1 trillion I believe and is "worth" more than the next 11 largest car manufacturers.
Yet it doesn't make any profits from building cars.

Benjamin Graham said that in the short term the market is a voting machine but in the long term it is a weighing machine.
Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.

OhNoNotimAgain wrote:Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.

They also "force" a disallocating(?) of that capital should the market come to realise it is overvalued. Bigger financial mistakes might include buying and holding "forever" (and the anchoring bias many suffer from around that initial buy decision, and the price it was done at). At least a passive, unemotional, tracker or index strategy protects you from such mistakes - and over reliance on a single strategy conviction - despite its potential failings.

dealtn wrote:

OhNoNotimAgain wrote:Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.

They also "force" a disallocating(?) of that capital should the market come to realise it is overvalued. Bigger financial mistakes might include buying and holding "forever" (and the anchoring bias many suffer from around that initial buy decision, and the price it was done at). At least a passive, unemotional, tracker or index strategy protects you from such mistakes - and over reliance on a single strategy conviction - despite its potential failings.

If these views are correct then, logically, there should surely be long term opportunities for anti-Index funds?

XFool wrote:

dealtn wrote:

OhNoNotimAgain wrote:Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.

They also "force" a disallocating(?) of that capital should the market come to realise it is overvalued. Bigger financial mistakes might include buying and holding "forever" (and the anchoring bias many suffer from around that initial buy decision, and the price it was done at). At least a passive, unemotional, tracker or index strategy protects you from such mistakes - and over reliance on a single strategy conviction - despite its potential failings.

If these views are correct then, logically, there should surely be long term opportunities for anti-Index funds?

I'm not sure how you come to that conclusion from your logic. Perhaps you can explain.

I agree though there will be opportunities, as always, for all kinds of strategies.

dealtn wrote:They also "force" a disallocating(?) of that capital should the market come to realise it is overvalued. Bigger financial mistakes might include buying and holding "forever" (and the anchoring bias many suffer from around that initial buy decision, and the price it was done at). At least a passive, unemotional, tracker or index strategy protects you from such mistakes - and over reliance on a single strategy conviction - despite its potential failings.

The opportunity given by cap weighted funds is equal weighting on purchase. This maximises diversification benefit far more effectively than cap weighting.

I've never seen any evidence that buy and hold cannot work perfectly well as long as the portfolio is sufficiently diversified at the outset.

BoE

OhNoNotimAgain wrote:

ReformedCharacter wrote:

OhNoNotimAgain wrote:In years to come people will look back and realise that indexing using mkt cap was one of the biggest financial mistakes ever made.

Please could you explain why? Thanks.

RC

It misallocates capital.

The clearest example in Tesla which is capitalised at about $1 trillion I believe and is "worth" more than the next 11 largest car manufacturers.
Yet it doesn't make any profits from building cars.

Benjamin Graham said that in the short term the market is a voting machine but in the long term it is a weighing machine.
Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.

Hurrah! I find myself agreeing with ONNA for once! Most investors in index funds are not of course concerned about that. They apparently are happy to invest in literally anything that the index funds care to include in their indices, and they do that even if the investment is overpriced rubbish. I usually call that diworsification.

Dod

Dod101 wrote:
Hurrah! I find myself agreeing with ONNA for once! Most investors in index funds are not of course concerned about that. They apparently are happy to invest in literally anything that the index funds care to include in their indices, and they do that even if the investment is overpriced rubbish. I usually call that diworsification.

Dod

Would you include, say, a Vanguard fund such as S&P 500 (VUSA) - 506 stocks at 0.07% ocf (or similar global index products) as diworsification? I've advised my youngest son who is in the fortunate position to be able to start investing for the long-term, and who has no particular interest nor the time to devote to the finer points of investment, to buy a couple of index trackers. Do you think I have given him bad advice?

RC

ReformedCharacter wrote:
Would you include, say, a Vanguard fund such as S&P 500 (VUSA) - 506 stocks at 0.07% ocf (or similar global index products) as diworsification? I've advised my youngest son who is in the fortunate position to be able to start investing for the long-term, and who has no particular interest nor the time to devote to the finer points of investment, to buy a couple of index trackers. Do you think I have given him bad advice?

RC

Take a look at the S&P 500 constituents -- see:

https://www.spglobal.com/spdji/en/indices/equity/sp-500/#overview

(Open a factsheet to see the top ten constituents.)

In position #4 is Tesla. Most of the top ten are FAANG stocks. 29% of the S&P 500 is IT stocks.

Full disclosure: I invest in the S&P 500 myself, as a proxy for America, but I like to think that I do so with my eyes open.

MDW1954

ReformedCharacter wrote:

Dod101 wrote:
Hurrah! I find myself agreeing with ONNA for once! Most investors in index funds are not of course concerned about that. They apparently are happy to invest in literally anything that the index funds care to include in their indices, and they do that even if the investment is overpriced rubbish. I usually call that diworsification.

Dod

Would you include, say, a Vanguard fund such as S&P 500 (VUSA) - 506 stocks at 0.07% ocf (or similar global index products) as diworsification? I've advised my youngest son who is in the fortunate position to be able to start investing for the long-term, and who has no particular interest nor the time to devote to the finer points of investment, to buy a couple of index trackers. Do you think I have given him bad advice?

RC

I do not know the S & P 500 (beyond what MDW has told us anyway) Index funds certainly provide exposure but your stock selectors have become whoever runs the constituents of the index, and they chose without any regard fo the quality of the share or its prospects, simply its size. I would go for a couple of investment trusts personally. I cannot say it is bad advice (after all even Buffett goes along with trackers but I just think you can do better.

Dod

Bubblesofearth wrote:

dealtn wrote:They also "force" a disallocating(?) of that capital should the market come to realise it is overvalued. Bigger financial mistakes might include buying and holding "forever" (and the anchoring bias many suffer from around that initial buy decision, and the price it was done at). At least a passive, unemotional, tracker or index strategy protects you from such mistakes - and over reliance on a single strategy conviction - despite its potential failings.

The opportunity given by cap weighted funds is equal weighting on purchase. This maximises diversification benefit far more effectively than cap weighting.

I've never seen any evidence that buy and hold cannot work perfectly well as long as the portfolio is sufficiently diversified at the outset.

BoE

If untouched all portfolios tend towards becoming scruffy mkt cap weighted portfolios. Which means it doesn't matter how you start.
Equal weighting has no logic behing it other than that of stamp collecting. Why would you have the same investment in Greggs as in Shell?

Dod101 wrote:

OhNoNotimAgain wrote:

ReformedCharacter wrote:Please could you explain why? Thanks.

RC

It misallocates capital.

The clearest example in Tesla which is capitalised at about $1 trillion I believe and is "worth" more than the next 11 largest car manufacturers.
Yet it doesn't make any profits from building cars.

Benjamin Graham said that in the short term the market is a voting machine but in the long term it is a weighing machine.
Mkt cap based trackers reinforcer the "popularity" element of this by allocating new capital to the largest company irrespective of any of its financial fundamentals.

Hurrah! I find myself agreeing with ONNA for once! Most investors in index funds are not of course concerned about that. They apparently are happy to invest in literally anything that the index funds care to include in their indices, and they do that even if the investment is overpriced rubbish. I usually call that diworsification.

Dod

And that means your portfolio is determined by faceless people at MSCI, S&P, FTSE and so on who pupport to follow rules but in practice are quite subjective. Worse, listing criteria are also managed so no index or bourse is left behind. In practice that means a race to the bottom of the quality measures so that more and more rubbish is allowed to list.

One other factor distorting mkt cap indices is that tech stock executives are mostly rewarded in equity. Apart from diluting punters who parted with real money the large holders do not sell their stock acquired for free but put it on margin and use the cash raised to invest in fixed income to get the income they need. So there is no compensating out flow of stock to bring prices down.
That makes the top end of the market more risky because these executives have very narrow portfolios that are also leveraged.
Fine when interest rates are falling.