Hacker News Reader

Comment by Amorymeltzer | Hacker News Reader

Caught this story this morning on Bloomberg's Odd Lots podcast[1], it's a great story. The thread that stands out most to me (and to the hosts) is that here's a person who looks at an 840-page government report, reads it in-depth, and creates an industry. That's a feel-good outcome, of hard work others aren't willing to do.

In a coincidence, perhaps, Planet Money's latest episode[2] dealt with Warren Buffet's bet on an ETF over hedge funds.

1: http://www.bloomberg.com/news/articles/2016-03-07/odd-lots-h...

2: http://www.npr.org/sections/money/2016/03/04/469247400/episo...

View on HN

To be clear, the Warren Buffet bet was about index funds. Not all ETFs track index funds, and even the ones that do aren't necessary. You can just buy into the funds directly.

Indeed, although Buffet did bet on an ETF, which was the index fund SPY.

You can make even more money in the long run if you use leverage to bet on the S&P 500. If you don't believe me, do the math out.

I guess this is tautologically correct, but if you did a 2x levered punt on SPX in 2007, you'd have gone broke.

That's not true if you sell stock to maintain a certain equity to debt ratio. If you use leverage in the S&P 500 then you have much a faster growth rate, so in the long term it's still better.

Clearly you cannot do math. It all depends on market timing, and if you get that wrong you will go broke as quick as your leverage. If you can get that right, well you would not be posting here, you would own here....

There's a funny story I read a while back about this play. If you did this for long enough eventually you'd be the biggest company in the S&P 500 (technically maybe not, but in practice very much so!).

Can you clarify the difference between an index fund and an etf? I always thought they were synonymous.

ETF = investment fund traded on a stock exchange.

Index fund = investment fund (mutual fund or ETF) that tracks an index, i.e. passively managed.

So is something like VSGAX an ETF or is it an index fund?

It's an index mutual fund[1] that is also available as an ETF[2].

1: https://personal.vanguard.com/us/funds/snapshot?FundId=5861&...

2: https://personal.vanguard.com/us/funds/snapshot?FundId=0938&...

If I understand correctly, ETF and index fund are orthogonal terms. An ETF is traded on the stock market -- in contrast to a mutual fund which you have to buy through other channels.

An index fund tracks an index rather than being actively managed.

I don't know about VSGAX specifically, but it could be both an ETF and an index fund.

Index fund, it isn't trading in an exchange.

ETFs are just investment funds you can buy and sell in the stock market, with their own symbol and everything just like any other stocks.

Index (passive) funds track an index, instead of trying to outperform the market.

You can have passive funds that are not ETFs (do not appear as a symbol in the stock market, have to go through a bank or whatever to buy shares), and active funds that are ETFs (actively managed).

Presumably any ETF is tracking something, that you could define to be an "index" in a degenerate sense (even if it's the "companies Buffet thinks are undervalued index", or the "solid gold bars index"). Or is there a technical definition of index?

not really.

he built index funds just like before. he was just the first one to afford enough lawyers to launch a product that would be shut down by regulators because of 800 page conflicting regulations

What backwards Kafka-esque horror show do you live in to believe a 800+ page government report of red tape and regulations is a feel-good outcome.

Some people really do prefer slavery over liberty.

Are you really arguing for deregulation of the financial industry in the name of 'liberty'?

Lack of regulation leads to things like the global financial crisis.

Read your sibling comments. voguchv is just trolling, and is not even complaining about regulation. He's complaining about a post mortem..

Putting aside the flamebait of your comment, you must not have read the story. The government report was following the massive crash in 1988 and was essentially an autopsy of what happened. One little section fantasized that perhaps a basket of funds might have helped avoid the events leading up to the crash. No regulations, no red-tape, just a postmortem accounting of the crash and a possible proscription.

Did you read TFA? Someone did an in-depth study of a market incident, noted a gap in the market, someone else filled the gap and made a successful product. They both presumably view it as a desirable outcome. Your aversion to it as a (hardly heavy-handed) government intervention is not really their problem.

If the same guy had written a white paper and tweetstorm while employed as a VC or investment banker or economics professor it wouldn't exactly be the difference between liberty and slavery.

Reply on news.ycombinator.com