An Interesting Article on ETFs

I'm not sure what I think about this yet. It touches on something I noted earlier (that most people don't really understand the markets, so when saving for retirement they have 401ks that are managed by other people. And so quite a bit of the market is decided by the people managing those funds), though the focus is more on Echange Traded Funds (ETFs) which I'd heard about before. And in a positive way, since actively managed accounts don't tend to beat the market. That is, getting a share in a fund that reflects the market tends to do better - and diversify your investments in the process - but I can see how that ultimately excaberates the problem of giving more power to the few people actively evaluating and trading based on knowledge (as opposed to 'this is going up, so I need to get in on it now'. Which honestly sounds like a crappy way to invest. I mean, it can work. But it's more about reading what everyone else is doing than actually paying attention to the companies at hand. I sometimes wish I knew an investor who's judgement I trusted. Who knew the businesses inside and out and could evaluate a company's potential not just on that, but also on how good company leadership is. By which I mean they don't get sucked into 'charisma', but identify the ones leading with the traits Jim Collins noted in his books. People good at building teams that consistently make good product, one sign of which (btw) is servant leadership and identitying and promoting talent. And clearing out the plumbing problems that push out those who have talent but aren't necessarily conforming to the status quo.)

Anyways. As an individual ETFs make sense. And most people just want to make sure their retirement isn't whittled away by inflation.. So matching the market is just fine. (The average American is less concerned with becoming millionaires, though the money would be nice ofc, than being able to have a reasonable standard of living. Able to pay their bills, live in a decent house, not stress about the basics, and able to take a nice vacation every once in a while. That's part of why there's so much condemnation for billionaires. When they've got more money than they could possibly spend in their life, why are they so stingy? And why make it even harder for the average American to make a living? For what? To have an even fatter bank account when they've already got more money than they know what to do with? You can't take it with you.) 

So. Short term incentives make sense, but there's definitely reason to be concerned about the long-term consequences. Maybe. 

I'm sure there will always be people who go back to the fundamentals, assess a business based on its actual financials rather than people's perceptions, and possibly can outperform the market. Isn't that what Warren Buffet did? 

And all the people who are just following what everyone else is doing will probably notice and follow their lead. Which will add quite the extra weight to their judgments. 

Hmmm. 

The real problem is - well, there's a couple of them. Market manipulators can still influence things (incorrectly, since they don't actually care about the fundamentals of a business), and it can be hard to identify who's accurately evaluating a company and who isn't. 

And there's still the issue of a few influential players essentially setting market value. 

In an ideal world, everyone would do their own research and invest on that basis... But it's just not reasonable to expect mom and pop to do what's essentially an entirely different career just to make sure they can retire comfortably. (Again, an honest-to-God safety net would address that issue and they'd probably be content to stay out of the markets entirely. But God forbid you suggest that in today's political climate.)