Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup
  • Dick Young’s Safe America

Potential Index Fund Component Loses 98%

November 27, 2019 By E.J. Smith

By Travis Wolfe @ Shutterstock.com

If you want to get an inside look at how the sausage is made with certain index funds, take a look at this story by Jacky Wong in The Wall Street Journal:

The giants of passive investment need to get more active.

Marble mining company ArtGo’s 3313 117.86% Hong Kong-listed shares fell 98% Thursday after index compiler MSCI, MSCI +1.24% in a rare U-turn, dropped its plan to add the company to its indexes. MSCI said the decision followed further analysis and feedback from market participants about the stock, which had soared 3,800% this year. A Heard on the Street column Wednesday may have helped concentrate minds.

The brutal reaction—$5.7 billion evaporated in a matter of hours—reflects how important the compilers have become as trillions of dollars pour into index-tracking funds globally. Yet these companies have been slow to shoulder their newfound responsibilities as the de facto regulators of capital flows.

Mostly they hide behind the argument that index inclusion is based on objective, quantitative criteria such as market capitalization and turnover. But following a purely mechanistic process is precisely what makes the system vulnerable. And given the rising popularity of passive investing, there is likely no shortage of people willing to try gaming it.

The index fund alarm bells have been ringing for a while now. Here’s some of what I’ve written on the subject in the past:

  • Vanguard is Telling You the Problem with Indexing
  • Vanguard Founder Jack Bogle Sounds the Alarm on Index Funds
  • Still Sure Indexing is Right for You?
  • New Correlation Meltdown Could Punish the Indexing Miracle
  • Another Legendary Investor Sounds the Alarm on Investments that Have Taken Over Nearly Half the Stock Market

Also, read my series on the Truth About the S&P 500. Reading it may change your mind about the value of indexing.

Originally posted on Your Survival Guy.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • The Trouble with this Bond Fund
  • Tech Loses its Biggest Stars
  • Dow Loses 665 Points
  • Author
  • Recent Posts
E.J. Smith
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@youngresearch.com
Latest posts by E.J. Smith (see all)
  • Your Retirement Life: Meet Your BMW Club Racing Program Director - January 22, 2021
  • Do You Know Who’s the Largest Owner of Farmland in America? - January 21, 2021
  • I’ve Been in Richard Young’s Maximizers for Years - January 20, 2021

Search Young Research

Most Popular

  • The Fed is Sacrificing Retirees to Save the Banks
  • Dick Young’s Safe America: Chapter 1, Part I
  • I’ve Been in Richard Young’s Maximizers for Years
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • The Power of a Compound Interest Table
  • Whether Through Audacity or Ignorance, Stock Fundamentals Are Being Ignored
  • Jim Simons's Renaissance Technologies vs. Internet Forum Traders
  • Smith Family Robinson in Live Free or Die, NH
  • The Highest Yielding S&P 500 Stocks
  • February RAGE Gauge: Americans Focusing on What's In Front of Them

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Absentee Ballots Not Verified
  • SARS-CoV-2: Probability of Outdoor Airborne Transmission Very Low
  • Your Personal Safety: Concealed-Carry How to Carry Your Freedom
  • Mostly Peaceful, Ungovernable Protestors
  • Biden’s Inaugural, the Most Confusing, Contradictory, Incoherent Ever?
  • Is the GOP Over? Not Even Close: Here’s Why
  • Impeaching an Ex-President is Unconstitutional
  • Ten Republican Senators to Get Behind
  • Why Do Government Officials Want To Silence Their Opponents?
  • And 2022 Is Right Around the Corner

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Social Media

  • Facebook
  • Twitter
  • Youtube
  • Pinterest

Copyright © 2021 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.