Great post. A passive investor in the Russell 2000 has ~40% annual turnover. I wonder if anyone will create passive vehicles that invest in a basket of stocks that 1) correlates with an index, but 2) targets stocks that won’t require much turnover.https://twitter.com/alphaarchitect/status/1134108534260584448 …
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Replying to @ByrneHobart
On same general theory, I wonder if someone is going to do something roboesque where it lets you trivially express something like "$500 a month into the S&P 500 except (bank) because you closed my account in 2004 and I will die before giving you another cent."
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Replying to @patio11
And if someone is being *very* clever they use the excuse of that second part to use non-proprietary indexes for the first part.
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Replying to @patio11
Explanation for peanut gallery: An index is just an algorithm which determines names and weightings of securities. The "branded" ones are owned by e.g. S&P, Dow Jones, etc etc. This is extraordinarily valuable IP because funds which use them pay licensing fees based on AUM.
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Replying to @patio11
The reason fund advisers are cool with that is because they think they get a marketing edge by selling S&P 500 Double Weight Tech Index Tracking but if the marketing edge is e.g. "We let you tweet that you're taking revenge on your bank" (or whatever), that is basically free.
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Replying to @patio11
There's some intellectual content in making the S&P 500, sure, but you're like two data scientists and six weeks of work from "Give me something which I can licitly market as 'Biggest 500 companies in America, market cap weighted'"
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(And there is *probably* a regulatory arbitrage here where if you were running a mutual fund you'd have to laboriously document what your process was and convince the SEC you did it, but if you sell it as "User let me make discretionary trades so, you know, I did" maybe works?)
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