Hacker News Reader

Comment by gorgoiler | Hacker News Reader

Why do index funds follow the exact companies in the index itself? Is it simply a branding thing? I’m buying into S&P500 because S&P500 is a highly recognized term used to mean “The US Economy”?

I feel that what this article is telling me is that passive funds are becoming active funds by way of manipulating the index itself. Kind of like if you’re passively invested in Brazil winning the World Cup but you can’t adjust the team or tactics, so instead you move the goal posts to where they’re about to kick the ball?

Pension funds seem more selective on the other hand. It’s always been the case that you can adjust your palette based on personal preference eg green energy, no weapons, tech stocks, etc.

View on HN

> Why do index funds follow the exact companies in the index itself?

The fund itself is a financial product with a fee attached. Regardless of an index's perceived "quality" funds will always be created as long as there is investor demand. In recent years there has been an explosion of exotic "thematic" ETFs with exaggerated returns & comparatively higher fees. These tend not to attract the most sophisticated crowd. You can be sure they won't perform well into the long term.

> Is it simply a branding thing? I’m buying into S&P500 because S&P500 is a highly recognized term used to mean “The US Economy”?

Absolutely, it is 100% branding. For better or for worse S&P500 is the barometer of US economic health. There's every incentive to manipulate it to score political points.

>I feel that what this article is telling me is that passive funds are becoming active funds by way of manipulating the index itself.

It's wrong. They're undoing a previous manipulation and making the index more accurately reflect the market.

Explain to me how adding weights to the float is undoing a previous manipulation and not manipulating the numbers.

That's the Nasdaq-100 lol who cares? Are you buying it? It is literally just an arbitrary bucket of stocks.

That's just deflection to avoid answering. I wonder if it's a product of cognitive dissonance or if it's voluntary.

It's perfectly legitimate for me to reject outright the idea that anything Nasdaq-100 does matters.

Why do you think anything that Nasdaq-100 does would matter?

Reply on news.ycombinator.com