Why the disdain for managed funds like ARKK that destroy total market funds?

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SlowMovingInvestor
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

as9 wrote: Sun Mar 07, 2021 9:35 pm
SlowMovingInvestor wrote: Sun Mar 07, 2021 6:17 pm I realize this forum doesn't that much about individual stocks, but I'm curious if someone has some opinions on one of ARK's major holdings, PLTR. [ No political comments, please].

Lots of software companies have very high valuations these days, so I'm not sure PLTR's are out of whack. I'm more interested in whether it's technology is really revolutionary or just a variant of existing AI/ML/Data Analytics.

I've heard high level descriptions of it's products, but I really don't know what sort of market they have (outside of government) and whether their main revenue source is consulting and software implementation rather than software sales.
I have about 3% of our portfolio in Palantir. It’s pretty much our only individual stock. It’s in the red from when I made the initial purchase and I’ve added to the position on the way down.

There’s definitely a lot of conflicting info about their tech and how they farm out engineers, but they also have a FAANG like hiring bar. I don’t know how big they are going to get, but I’m confident they are going to be around for a long time.
I'm skeptical of the hiring bar thing (having worked at a company with a similar hiring bar :happy).

I'm a little negative on companies that rely on big implementation projects and even more so those that are too dependent on large government contracts. It can be decent steady business, but it's margins are generally mostly fixed. And it's hard to get a foothold through small usage at a firm, the way firms like Atlassian can with their groupware software.

But I decided to YOLO and put a miniscule amount of $ (< 0.1%) into it yesterday.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by rick51 »

OP, you do realize you are addressing your question to the alumni of the school of hard knocks. I’m not sure if distain is the right word. I do believe several posters are sincerely attempting to pass along the wisdom that their years of investing have brought them.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MinnGuyInvesting »

SlowMovingInvestor wrote: Sun Mar 07, 2021 6:17 pm I realize this forum doesn't that much about individual stocks, but I'm curious if someone has some opinions on one of ARK's major holdings, PLTR. [ No political comments, please].

Lots of software companies have very high valuations these days, so I'm not sure PLTR's are out of whack. I'm more interested in whether it's technology is really revolutionary or just a variant of existing AI/ML/Data Analytics.

I've heard high level descriptions of it's products, but I really don't know what sort of market they have (outside of government) and whether their main revenue source is consulting and software implementation rather than software sales.
I hold PLTR. (and held it prior to ARK going in).
It's not in the 2% of my portfolio range, but I keep adding to it.
I think what they built took years to build and is unlike anything else out there right now.
I think they have good management. Patient genius is what comes to mind.

I think they'll be around for a long time and only gain in profitability as they scale.
The hardest work is done there.

I think it's a good stock for those who are patient.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MinnGuyInvesting »

Oh, and I'm going to post in this thread today because ARK is actually coming back some today unlike the last 30 days of 6% daily drops!
Hopefully not every company Cathie owns sucks.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by Da5id »

MinnGuyInvesting wrote: Tue Mar 09, 2021 9:41 am Oh, and I'm going to post in this thread today because ARK is actually coming back some today unlike the last 30 days of 6% daily drops!
Hopefully not every company Cathie owns sucks.
I would note that the need/desire to pay day-to-day or month-to-month attention to these "hot" funds is one reason among many some bogleheads have "the disdain". But good luck with your investment!
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MinnGuyInvesting »

Da5id wrote: Tue Mar 09, 2021 9:44 am
MinnGuyInvesting wrote: Tue Mar 09, 2021 9:41 am Oh, and I'm going to post in this thread today because ARK is actually coming back some today unlike the last 30 days of 6% daily drops!
Hopefully not every company Cathie owns sucks.
I would note that the need/desire to pay day-to-day or month-to-month attention to these "hot" funds is one reason among many some bogleheads have "the disdain". But good luck with your investment!
I agree.
That's why I try to keep my updates monthly. That's frequent enough, but after a bad few weeks, I just needed at least one good day!
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

MinnGuyInvesting wrote: Tue Mar 09, 2021 9:41 am Oh, and I'm going to post in this thread today because ARK is actually coming back some today unlike the last 30 days of 6% daily drops!
Hopefully not every company Cathie owns sucks.
Is ARKK still 39% of your port after all those drops?

Do you use rebalancing bands?
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Re: ARKK: Top 1% to Bottom 1%

Post by Carol88888 »

nedsaid wrote: Mon Mar 08, 2021 3:25 pm
Carol88888 wrote: Mon Mar 08, 2021 12:39 pm
nedsaid wrote: Sun Mar 07, 2021 11:55 am
Taylor Larimore wrote: Sun Mar 07, 2021 11:11 am Bogleheads:

ARKK is a gamble. Last year it was in the top 1% of its class. This year it is in the bottom 1% of its class.

https://www.morningstar.com/etfs/arcx/arkk/quote

Bogleheads are foolish to gambling with their retirement and other goals.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk."
There is nothing wrong with owning aggressive investments but they should be a smaller part of your portfolio. I have owned aggressive growth funds like certain American Century funds like Heritage for many years. Sort of like putting an additive into the gas tank to boost octane, a Tiger in the Tank. But like anything else, you don't want to overdo it. Don't want to blow up the gas tank.

I have no recommendation on the ARK Funds but I suppose they can add a bit of excitement to a portfolio. We all can use a little excitement but not too much. They seem to be a better answer to a mid-life crisis than a bad toupee, a sportscar, or an unhealthy relationship.
Do you have any parameters for what you might consider a reasonable amount of an aggressive investment to an otherwise widely diversified portfolio?
In my case, I have a lot of Value investments in my portfolio and always have so I felt comfortable having a higher proportion of my portfolio in more aggressive investments like the Growth funds at American Century. In the days when my portfolio was over 90% stocks, I had probably 40% or so in moderately or very aggressive stock funds. Today, I am at about 65% stocks probably less than 10% of the portfolio is in very aggressive investments. With the ARK funds, I would probably limit it to 5% of a portfolio, they are pretty high octane investments.
I am mostly indexed but I,too, hold a slug of value stocks for the dividends. I have a much smaller portion (15%) of what I consider to be aggressive.
If I lower it, it doesn't add much value to the portfolio so I keeping it right here.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by Nathan Drake »

SlowMovingInvestor wrote: Tue Mar 09, 2021 8:56 am
Nathan Drake wrote: Mon Mar 08, 2021 9:13 pm
My problem isn't so much that ARK represents actively managed growth stock ETFs, or that the premise is that it can outperform. My problem is that Cathie Wood's thesis is that she's on the "right side of change" and that "index fund investors will be wiped out and left behind". For someone that's been in the investment management industry for many decades, it's an intellectually dishonest position to take with all the data that is available. Even if she is correct in her choices and outperforms the market over the long term, her choices *WILL* become the market through index funds, and their growth will still be enjoyed by those that choose passive investments even if it's not as high as ARK funds.
Did she actually use those phrases or phrases similar to those ? However, ARK performs, I agree completely that this is a bad position to take. Her religious (literally so) fervor for high growth stocks seems to have led to get her getting carried away.

Beyond that, it's hard for me to believe that an economy where capital (and salaries and stock option wealth) flows to a small group of companies and a few skilled people trained in those areas, while skipping over a huge portion of the economy and work force is somehow beneficial as a whole.
Yes she uses those phrases quite regularly. A YouTube search of them is enlightening to say the least, but it just signifies to me that there’s no real skill going on here.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by anon_investor »

watchnerd wrote: Tue Mar 09, 2021 9:51 am
MinnGuyInvesting wrote: Tue Mar 09, 2021 9:41 am Oh, and I'm going to post in this thread today because ARK is actually coming back some today unlike the last 30 days of 6% daily drops!
Hopefully not every company Cathie owns sucks.
Is ARKK still 39% of your port after all those drops?

Do you use rebalancing bands?
Rebalancing yesterday would have helped today.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by Keenobserver »

hoofaman wrote: Sun Mar 07, 2021 10:25 am
Keenobserver wrote: Sun Mar 07, 2021 9:47 am
birdog wrote: Sun Mar 07, 2021 7:14 am
Keenobserver wrote: Sun Mar 07, 2021 7:11 am Looking for a re-entry point back into Arkk? Maybe.
You are?
Maybe, but will have drop a bit more and put some play money. Something tells me Tesla is close to the bottom.
How can you tell? Honest question, Tesla was $200 in June ($1,000 pre split), which seemed crazy at the time. What has changed with Tesla since June to make it worth 3x or more that price?
Hey maybe I should start predicting the market? Umm..nope..No one knows norhing...
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by hoofaman »

Keenobserver wrote: Tue Mar 09, 2021 1:54 pm
hoofaman wrote: Sun Mar 07, 2021 10:25 am
Keenobserver wrote: Sun Mar 07, 2021 9:47 am
birdog wrote: Sun Mar 07, 2021 7:14 am
Keenobserver wrote: Sun Mar 07, 2021 7:11 am Looking for a re-entry point back into Arkk? Maybe.
You are?


Maybe, but will have drop a bit more and put some play money. Something tells me Tesla is close to the bottom.
How can you tell? Honest question, Tesla was $200 in June ($1,000 pre split), which seemed crazy at the time. What has changed with Tesla since June to make it worth 3x or more that price?
Hey maybe I should start predicting the market? Umm..nope..No one knows norhing...
+1, good call today, 18% rip is incredible
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by Keenobserver »

Keenobserver wrote: Sun Mar 07, 2021 3:50 pm
Da5id wrote: Sun Mar 07, 2021 10:30 am
hoofaman wrote: Sun Mar 07, 2021 10:25 am
Keenobserver wrote: Sun Mar 07, 2021 9:47 am
birdog wrote: Sun Mar 07, 2021 7:14 am

You are?
Maybe, but will have drop a bit more and put some play money. Something tells me Tesla is close to the bottom.
How can you tell? Honest question, Tesla was $200 in June ($1,000 pre split), which seemed crazy at the time. What has changed with Tesla since June to make it worth 3x or more that price?
Consulting "The Amazing Carnac" clearly can provide this critical information in a timely manner (dated reference, but hey lots of us on bogleheads are on the older side).
With Tesla its more about behavior than financials. There are heaps of people wanting to jump in, looking for the bottom. So when they decide/ " feel" the bottom is near, they are going to jump in troves. Tesla is not going anywhere, and the fanboys are loyal.
Yup... i didnt do anything though..going to continue indexing..peace of mind
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by bgf »

SlowMovingInvestor wrote: Tue Mar 09, 2021 8:40 am
bgf wrote: Mon Mar 08, 2021 9:37 pm
I think the structure of ETFs does have a benefit. We saw it with bond ETFs during the crash. When APs act in their own self interest by selling, they do so at a spread that will be profitable given the liquidity risk. If the ETF price varies a lot from NAV it discourages investors from selling the ETF.

With a mutual fund this feedback loop doesn't exist.

Edit* well I just got to Grabiners post, and I think we're saying the same thing, which is comforting as he knows way more than I do.
I think very few retail investors are as savvy as Grabiner :happy. Even savvy investors would likely not know the NAV intra-day. They might notice the spread, but I think if most people are genuinely concerned about a 20% fall, they'll just take the spread hit. I wouldn't presume to speak for Grabiner, but in that case it seems the motivating factor was TLH, where spreads are important.

I'm still unsure about some of the mechanics of redemption/creation. Do the APs settle at the end of the day with the sponsor or do they do so immediately (or possibly at some fixed interval during the trading day) ?

ADDED: I noticed that GBTC (Bitcoin Trust) seems to trade at a discount to NAV when it's falling and at a premium when it's rising. It's not an ETF, but I think that would go against the idea that people are reluctant to sell something highly volatile when it's falling.
Whether that is the case or not, I think ETFs are fundamentally and structurally designed to be better with respect to illiquidity. Mutual funds suffer from a cascading process whereby the fund has to sell its most liquid assets to meet redemptions, making it increasingly illiquid.

https://www.epsilontheory.com/et-podcas ... ll-street/

Pick up around 28 minutes in,and this question is discussed.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

bgf wrote: Tue Mar 09, 2021 4:43 pm
Whether that is the case or not, I think ETFs are fundamentally and structurally designed to be better with respect to illiquidity. Mutual funds suffer from a cascading process whereby the fund has to sell its most liquid assets to meet redemptions, making it increasingly illiquid.

https://www.epsilontheory.com/et-podcas ... ll-street/

Pick up around 28 minutes in,and this question is discussed.
I understand your argument and it's a good one, but I'm not entirely convinced. Someone has to do the selling/rebalancing in any case, whether it's the AP/market maker (for an ETF) or an MF's trading desk calling brokers to do the selling.

I understand that for an active ETF there may be some back and forth between the AP and the sponsor over the exact basket to be sold, but ultimately, a position in small illiquid stocks is going to be difficult to sell, and APs may choose not to provide liquidity if they're taking a loss on sales (I don't think they're under any contractual obligation to provide liquidity at a 'fair' spread).

I can understand that life may be easier for the ETF's trading desk, and it allows lower expense ratios (which are paid for by the spread). But I'm not sure it gets rid of the fundamental problem of selling illiquid stocks -- someone has to do it.

ADDED: I read this paper that a previous post had linked to about bond ETF redemptions.

https://www.bis.org/publ/qtrpdf/r_qt2103d.pdf

It points out how bond ETFs can diverge from holdings and how illiquid or hard to find holdings are 'managed'. However, I'm not sure that the same methods can be used for the equity ETF market.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by JimmyJammy »

Looks like it's not too late to buy the dip on one of these ARK funds!

https://ark-funds.com/?__hstc=84851910. ... 1724542848
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by JimmyJammy »

MinnGuyInvesting wrote: Tue Mar 09, 2021 9:39 am
SlowMovingInvestor wrote: Sun Mar 07, 2021 6:17 pm I realize this forum doesn't that much about individual stocks, but I'm curious if someone has some opinions on one of ARK's major holdings, PLTR. [ No political comments, please].

Lots of software companies have very high valuations these days, so I'm not sure PLTR's are out of whack. I'm more interested in whether it's technology is really revolutionary or just a variant of existing AI/ML/Data Analytics.

I've heard high level descriptions of it's products, but I really don't know what sort of market they have (outside of government) and whether their main revenue source is consulting and software implementation rather than software sales.
I hold PLTR. (and held it prior to ARK going in).
It's not in the 2% of my portfolio range, but I keep adding to it.
I think what they built took years to build and is unlike anything else out there right now.
I think they have good management. Patient genius is what comes to mind.

I think they'll be around for a long time and only gain in profitability as they scale.
The hardest work is done there.

I think it's a good stock for those who are patient.
I bought PLTR on this dip! They have a deal with Amazon AWS now as well as the previously announced IBM cloud deal. Looks very positive.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

JimmyJammy wrote: Wed Mar 10, 2021 8:26 am Looks like it's not too late to buy the dip on one of these ARK funds!

https://ark-funds.com/?__hstc=84851910. ... 1724542848
Back up the Truck ! :twisted:

Although come to think of it, I'm up 13% on my small PLTR buy. Who needs ARK ? I'm a supergenius !
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by dmcmahon »

SlowMovingInvestor wrote: Wed Mar 10, 2021 8:36 am
JimmyJammy wrote: Wed Mar 10, 2021 8:26 am Looks like it's not too late to buy the dip on one of these ARK funds!

https://ark-funds.com/?__hstc=84851910. ... 1724542848
Back up the Truck ! :twisted:

Although come to think of it, I'm up 13% on my small PLTR buy. Who needs ARK ? I'm a supergenius !
If I was inclined to invest in the types of companies ARK buys, I agree that you’re just as likely to do well on your own. This tech wreck is a typical shake the tree move and profitless darlings are falling hardest. PLTR has been in business a good while and is profitable. Also ARK has passed over some possible future winners (SNOW - hey Cathie, call me!) and then doubled down on incredibly overvalued (IMO) shares like TSLA. Picking your own would also let you create your own blend from the infotech, biotech, and other innovation areas without having to divide your stake among 4-5 sub-funds. You’d want an ETF to get diversification of a significant stake. For “fun money” investment I’d rather pick my own.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by Yarlonkol12 »

For those who hold ARKK, I'm glad to see you all getting a nice recovery so far, and good job "diamond handing"

Question: For those who considered ARKK, what about QQQJ which is a newish index fund from Invesco that tracks the next largest 100 companies in the Nasdaq? Mostly mid and small caps

https://www.invesco.com/us/financial-pr ... d=ETF-QQQJ

Anyone holding it?
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MinnGuyInvesting »

tiburblium wrote: Thu Mar 11, 2021 7:13 am For those who hold ARKK, I'm glad to see you all getting a nice recovery so far, and good job "diamond handing"

Question: For those who considered ARKK, what about QQQJ which is a newish index fund from Invesco that tracks the next largest 100 companies in the Nasdaq? Mostly mid and small caps

https://www.invesco.com/us/financial-pr ... d=ETF-QQQJ

Anyone holding it?
Thanks. For anyone who buys and forgets about it, the last month was less stressful for them.
Burying your head in the sand can do wonders.


Regarding QQQJ, it has a 0.15 ER which is significantly lower than ARK.
Many of the funds listed are familiar names as some ARK holdings. (TTD, ROKU, TXG).

I do see a few companies in their list that I would not be super passionate about.

So then it's a question of do you trust ARK active management or not. If you don't this would be worth a try to get deep exposure to the non-FAANG nasdaq.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

MinnGuyInvesting wrote: Thu Mar 11, 2021 8:55 am
So then it's a question of do you trust ARK active management or not. If you don't this would be worth a try to get deep exposure to the non-FAANG nasdaq.
I trust them in the sense that I think Ms Wood is sincere in her beliefs. Unlike during the dotcom era, where a lot of analysts were peddling stocks they thought were trash.

I don't trust them in the sense that I don't think they've found the keys to the kingdom for active investing.

I like the idea of QQQJ (although one would have to compare to VBK, small cap growth).

ADDED: Ms Wood's reported negative comments about index funds are annoying enough to me that I wouldn't invest with her in any case.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by Keenobserver »

Some play money in ARKk cant hurt...gets rid of the itch and the feeling of being left behind... purely psychological though
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by nisiprius »

bgf wrote: Tue Mar 09, 2021 4:43 pm
Whether that is the case or not, I think ETFs are fundamentally and structurally designed to be better with respect to illiquidity. Mutual funds suffer from a cascading process whereby the fund has to sell its most liquid assets to meet redemptions, making it increasingly illiquid.
Give me a specific example of any big, mainstream mutual fund that a normal Boglehead would invest in, in which you can see this effect happening. It's no more a reason to avoid mutual funds than the Flash Crash of 2010 is a reason to avoid ETFs.

The PIMCO Total Return fund suffered huge outflows when star manager Bill Gross left in 2014, dropping from something like $300 billion in assets to $100 billion, in about a year (it's down to $50 billion now). A fair amount of money flowed into competitor Metropolitan West over the same time period.

There were severe outflows from the PIMCO Total Return fund, but I don't see any obvious evidence that they caused problems for the fund or for the fund's investors.

Source

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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by bgf »

nisiprius wrote: Thu Mar 11, 2021 8:51 pm
bgf wrote: Tue Mar 09, 2021 4:43 pm
Whether that is the case or not, I think ETFs are fundamentally and structurally designed to be better with respect to illiquidity. Mutual funds suffer from a cascading process whereby the fund has to sell its most liquid assets to meet redemptions, making it increasingly illiquid.
Give me a specific example of any big, mainstream mutual fund that a normal Boglehead would invest in, in which you can see this effect happening. It's no more a reason to avoid mutual funds than the Flash Crash of 2010 is a reason to avoid ETFs.

The PIMCO Total Return fund suffered huge outflows when star manager Bill Gross left in 2014, dropping from something like $300 billion in assets to $100 billion, in about a year (it's down to $50 billion now). A fair amount of money flowed into competitor Metropolitan West over the same time period.

There were severe outflows from the PIMCO Total Return fund, but I don't see any obvious evidence that they caused problems for the fund or for the fund's investors.

Source

Image
1) why did you quote me, as you don't seem to be having the same conversation?

2) what's a "normal boglehead" these days?

3) why don't you list all the "big, mainstream mutual funds" yourself so we can go ahead and get this charade over with.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by anon_investor »

Keenobserver wrote: Thu Mar 11, 2021 5:53 pm Some play money in ARKk cant hurt...gets rid of the itch and the feeling of being left behind... purely psychological though
If it's play money, why pay the 0.75% ER? Why not just buy some individual stocks?
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

anon_investor wrote: Thu Mar 11, 2021 11:30 pm
Keenobserver wrote: Thu Mar 11, 2021 5:53 pm Some play money in ARKk cant hurt...gets rid of the itch and the feeling of being left behind... purely psychological though
If it's play money, why pay the 0.75% ER? Why not just buy some individual stocks?
More than the 0.75% ER, the reason to invest on your own is that if this is play, YOLO money, then you want to shoot for a real 10 bagger, which a few individual stocks could get you, but even ARKK wouldn't. [ Of course individual stocks would be even more volatile than ARKK, and you could end up 90% down, but like I said, this is play money]
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MinnGuyInvesting »

anon_investor wrote: Thu Mar 11, 2021 11:30 pm
Keenobserver wrote: Thu Mar 11, 2021 5:53 pm Some play money in ARKk cant hurt...gets rid of the itch and the feeling of being left behind... purely psychological though
If it's play money, why pay the 0.75% ER? Why not just buy some individual stocks?
Many have suggested this.

Reasons why not:
1. You would always be at least a half day late on all trades. Timing of the buying and selling to model the ARK portfolio on a day by day basis would be rather difficult.

2. That would be a lot of buying and selling.

3. If you have $100,000 in a ARK fund, you are paying 0.75% = $750 a year for ARK to do the trades for you. Doing it daily, you would probably spend 250 hours a year doing those trades yourself. What do you value your time at?

4. Part of Cathie's performance can be related to a stock growing exponentially. Missing out on that stock in your own trades could miss out on some of the large performance growth if you don't keep up.

Reasons why you should:
1. You can tilt your holdings if you want.
2. You can harvest your losses for taxes on your misses.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by anon_investor »

MinnGuyInvesting wrote: Fri Mar 12, 2021 7:34 am
anon_investor wrote: Thu Mar 11, 2021 11:30 pm
Keenobserver wrote: Thu Mar 11, 2021 5:53 pm Some play money in ARKk cant hurt...gets rid of the itch and the feeling of being left behind... purely psychological though
If it's play money, why pay the 0.75% ER? Why not just buy some individual stocks?
Many have suggested this.

Reasons why not:
1. You would always be at least a half day late on all trades. Timing of the buying and selling to model the ARK portfolio on a day by day basis would be rather difficult.

2. That would be a lot of buying and selling.

3. If you have $100,000 in a ARK fund, you are paying 0.75% = $750 a year for ARK to do the trades for you. Doing it daily, you would probably spend 250 hours a year doing those trades yourself. What do you value your time at?

4. Part of Cathie's performance can be related to a stock growing exponentially. Missing out on that stock in your own trades could miss out on some of the large performance growth if you don't keep up.

Reasons why you should:
1. You can tilt your holdings if you want.
2. You can harvest your losses for taxes on your misses.
I was not referring to your strategy, I was referring to the use of ARKK with play money. Personally, for my play money allocation I stick with individual stocks, athought, I will buy index ETFs (e.g. VGT or VUG) as a place holder if I am searching for a new play money target. Using a relatively high expense ratio ETF for play money seems silly to me since the point of play money (at least for me) is to take big moon shots or at least some quick short term profits. But this is play money, certainly less than 5% of my total portfolio.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MotoTrojan »

angeleyes wrote: Sun Feb 14, 2021 2:26 am Why invest in anything other than Berkshire Hathaway? It's clearly beaten the index by a wide margin for a very long time. We can't in invest in past returns so diversification is the only answer in my opinion.
I think you meant Tobacco stocks, for which Berkshire decided not to invest in but have outperformed EVERYTHING.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

MotoTrojan wrote: Fri Mar 12, 2021 9:42 am
angeleyes wrote: Sun Feb 14, 2021 2:26 am Why invest in anything other than Berkshire Hathaway? It's clearly beaten the index by a wide margin for a very long time. We can't in invest in past returns so diversification is the only answer in my opinion.
I think you meant Tobacco stocks, for which Berkshire decided not to invest in but have outperformed EVERYTHING.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by MotoTrojan »

watchnerd wrote: Fri Mar 12, 2021 9:45 am
MotoTrojan wrote: Fri Mar 12, 2021 9:42 am
angeleyes wrote: Sun Feb 14, 2021 2:26 am Why invest in anything other than Berkshire Hathaway? It's clearly beaten the index by a wide margin for a very long time. We can't in invest in past returns so diversification is the only answer in my opinion.
I think you meant Tobacco stocks, for which Berkshire decided not to invest in but have outperformed EVERYTHING.
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Tasty returns! And doesn't even look like it includes dividends?
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

MotoTrojan wrote: Fri Mar 12, 2021 9:57 am

Tasty returns! And doesn't even look like it includes dividends?
I believe you're correct.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

ARKK is so last month, enter MOON

https://www.bloomberg.com/news/articles ... by-10-fold

Around $260M in assets.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by dmcmahon »

SlowMovingInvestor wrote: Wed Mar 17, 2021 11:30 pm ARKK is so last month, enter MOON

https://www.bloomberg.com/news/articles ... by-10-fold

Around $260M in assets.
Cathie’s 15 minutes are up?
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

I'm still waiting for FOMO.

It's already in my sig.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by TravelforFun »

dmcmahon wrote: Wed Mar 17, 2021 11:34 pm
SlowMovingInvestor wrote: Wed Mar 17, 2021 11:30 pm ARKK is so last month, enter MOON

https://www.bloomberg.com/news/articles ... by-10-fold

Around $260M in assets.
Cathie’s 15 minutes are up?
Don't count her out yet.

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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by dmcmahon »

TravelforFun wrote: Thu Mar 18, 2021 1:22 am
dmcmahon wrote: Wed Mar 17, 2021 11:34 pm
SlowMovingInvestor wrote: Wed Mar 17, 2021 11:30 pm ARKK is so last month, enter MOON

https://www.bloomberg.com/news/articles ... by-10-fold

Around $260M in assets.
Cathie’s 15 minutes are up?
Don't count her out yet.

TravelforFun
What, you mean airlines, cruise ships, theme parks, oil companies, and basic materials aren’t the future on which I can build the next 20 years of my investment returns? 8-)
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by anoop »

Index Fund is to ARKK
as
ARKK is to MOON
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by nisiprius »

bgf wrote: Thu Mar 11, 2021 9:23 pm
nisiprius wrote: Thu Mar 11, 2021 8:51 pm
bgf wrote: Tue Mar 09, 2021 4:43 pm
Whether that is the case or not, I think ETFs are fundamentally and structurally designed to be better with respect to illiquidity. Mutual funds suffer from a cascading process whereby the fund has to sell its most liquid assets to meet redemptions, making it increasingly illiquid.
Give me a specific example of any big, mainstream mutual fund that a normal Boglehead would invest in, in which you can see this effect happening. It's no more a reason to avoid mutual funds than the Flash Crash of 2010 is a reason to avoid ETFs.

The PIMCO Total Return fund suffered huge outflows when star manager Bill Gross left in 2014, dropping from something like $300 billion in assets to $100 billion, in about a year (it's down to $50 billion now). A fair amount of money flowed into competitor Metropolitan West over the same time period...
1) why did you quote me, as you don't seem to be having the same conversation?

2) what's a "normal boglehead" these days?

3) why don't you list all the "big, mainstream mutual funds" yourself so we can go ahead and get this charade over with.
1) I understood you to be saying that mutual funds have a meaningful danger of collapse due to illiquidity and inability to meet redemptions, and that ETFs are fundamentally better because they don't have this problem.

I was illustrating that a mutual fund that had suffered severe outflows seemed to have had no problem meeting redemptions.

2) I shouldn't have said "normal," but to me a Boglehead is someone who calls themself a Boglehead. I think there are some forum posters who would not. Have you, personally, ever seriously considered in investing in a mutual fund, or an ETF with a similar mutual fund counterpart, in which the mutual fund collapsed due to illiquidity but the ETF survived?

I'm not listing big, mainstream funds that have collapsed because I don't believe there have been any. I don't believe it's a real danger, just as on the ETF side I don't believe the "flash crash" of 2010 represents a real danger. By regulation, mutual funds are supposed to invest in adequately liquid assets. I only know of once case of a mutual fund collapsing due to illiquidity and an investor "run" on the fund, the Third Avenue Focused Credit fund, and I think it's fair to say that it collapsed because 1) it failed to do what it was supposed to do, and also 2) it is a very unusual fund that I can't remember ever being mentioned in the forum before it collapsed.

With regard to liquidity, mutual funds have been pretty safe and ETFs have been pretty safe. There have been unusual situations and unusual specific cases of problems. Trying to make a liquid product out of illiquid assets is bound to create occasional problem of one sort or another, and Rick Ferri, author of The ETF Book, has specifically written an article suggesting that mutual funds are preferable for bonds:
This brings us to the two ways to solve the bond ETF discount problem:

1) Don’t buy bond ETFs. Stick with traditional open-ended funds that trade at NAV at the end of the day. You won’t have to worry about ETF price swings due to liquidity issues and other matters.

2) If you do decide to invest in bond ETFs, don’t trade them during volatile days. Wait until prices recover before putting in your order. In the words of someone much wiser than me, this too shall pass.
Last edited by nisiprius on Thu Mar 18, 2021 8:51 am, edited 2 times in total.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by rosalee »

MOON has lots of bio-tech. I'm loaded in that sector but i do like BOTZ, since i think automation and robots on the work floor, and numerous other places, will have a ever growing place in all societies.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by bgf »

nisiprius wrote: Thu Mar 18, 2021 8:43 am
bgf wrote: Thu Mar 11, 2021 9:23 pm
nisiprius wrote: Thu Mar 11, 2021 8:51 pm
bgf wrote: Tue Mar 09, 2021 4:43 pm
Whether that is the case or not, I think ETFs are fundamentally and structurally designed to be better with respect to illiquidity. Mutual funds suffer from a cascading process whereby the fund has to sell its most liquid assets to meet redemptions, making it increasingly illiquid.
Give me a specific example of any big, mainstream mutual fund that a normal Boglehead would invest in, in which you can see this effect happening. It's no more a reason to avoid mutual funds than the Flash Crash of 2010 is a reason to avoid ETFs.

The PIMCO Total Return fund suffered huge outflows when star manager Bill Gross left in 2014, dropping from something like $300 billion in assets to $100 billion, in about a year (it's down to $50 billion now). A fair amount of money flowed into competitor Metropolitan West over the same time period...
1) why did you quote me, as you don't seem to be having the same conversation?

2) what's a "normal boglehead" these days?

3) why don't you list all the "big, mainstream mutual funds" yourself so we can go ahead and get this charade over with.
1) I understood you to be saying that mutual funds have a meaningful danger of collapse due to illiquidity and inability to meet redemptions, and that ETFs are fundamentally better because they don't have this problem.

I was illustrating that a mutual fund that had suffered severe outflows seemed to have had no problem meeting redemptions.

2) I shouldn't have said "normal," but to me a Boglehead is someone who calls themself a Boglehead. I think there are some forum posters who would not. Have you, personally, ever seriously considered in investing in a mutual fund, or an ETF with a similar mutual fund counterpart, in which the mutual fund collapsed due to illiquidity but the ETF survived?

I'm not listing big, mainstream funds that have collapsed because I don't believe there have been any. I don't believe it's a real danger, just as on the ETF side I don't believe the "flash crash" of 2010 represents a real danger. By regulation, mutual funds are supposed to invest in adequately liquid assets. I only know of once case of a mutual fund collapsing due to illiquidity and an investor "run" on the fund, the Third Avenue Focused Credit fund, and I think it's fair to say that it collapsed because 1) it failed to do what it was supposed to do, and also 2) it is a very unusual fund that I can't remember ever being mentioned in the forum before it collapsed.

With regard to liquidity, mutual funds have been pretty safe and ETFs have been pretty safe. There have been unusual situations and unusual specific cases of problems. Trying to make a liquid product out of illiquid assets is bound to create occasional problem of one sort or another, and Rick Ferri, author of The ETF Book, has specifically written an article suggesting that mutual funds are preferable for bonds:
This brings us to the two ways to solve the bond ETF discount problem:

1) Don’t buy bond ETFs. Stick with traditional open-ended funds that trade at NAV at the end of the day. You won’t have to worry about ETF price swings due to liquidity issues and other matters.

2) If you do decide to invest in bond ETFs, don’t trade them during volatile days. Wait until prices recover before putting in your order. In the words of someone much wiser than me, this too shall pass.
i just think you misunderstood and/or i did not clearly make my point. i never meant to argue that mutual funds have a "meaningful danger of collapse." as are most discussions on this board, we are talking about small discrepancies. i am no expert of the structural design of ETFs or mutual funds, but based on what i read and have heard, they are by design superior to mutual funds in this particular respect. HOWEVER, and its a big "however," the slight superiority by no means should be interpreted as some attack against mutual funds. mutual funds have been around a long time; we all have a pretty good idea of whether there is a 'meaningful' risk of liquidation.

iirc, i was really trying to respond to someone who was making the opposite point i am, that ETFs are somehow WORSE than mutual funds and ARE at risk of liquidation. again, it depends on the ETF, but i was speaking specifically to the fundamental structure of ETFs as a vehicle.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by nisiprius »

bgf wrote: Thu Mar 18, 2021 9:29 am...i just think you misunderstood and/or i did not clearly make my point. i never meant to argue that mutual funds have a "meaningful danger of collapse." as are most discussions on this board, we are talking about small discrepancies. i am no expert of the structural design of ETFs or mutual funds, but based on what i read and have heard, they are by design superior to mutual funds in this particular respect. HOWEVER, and its a big "however," the slight superiority by no means should be interpreted as some attack against mutual funds. mutual funds have been around a long time; we all have a pretty good idea of whether there is a 'meaningful' risk of liquidation.

iirc, i was really trying to respond to someone who was making the opposite point i am, that ETFs are somehow WORSE than mutual funds and ARE at risk of liquidation. again, it depends on the ETF, but i was speaking specifically to the fundamental structure of ETFs as a vehicle...
Got it. Thanks.

To close the loop, I think you are saying that with less-liquid assets, in theory, in ETFs, minor divergences from NAV act as a safety valve, while in mutual funds, the requirement of redemption at NAV could in theory cause a run on the fund that could blow up the fund, and therefore ETFs have a structural superiority even if it is not important in practice. RIght?
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by bgf »

nisiprius wrote: Thu Mar 18, 2021 9:56 am
bgf wrote: Thu Mar 18, 2021 9:29 am...i just think you misunderstood and/or i did not clearly make my point. i never meant to argue that mutual funds have a "meaningful danger of collapse." as are most discussions on this board, we are talking about small discrepancies. i am no expert of the structural design of ETFs or mutual funds, but based on what i read and have heard, they are by design superior to mutual funds in this particular respect. HOWEVER, and its a big "however," the slight superiority by no means should be interpreted as some attack against mutual funds. mutual funds have been around a long time; we all have a pretty good idea of whether there is a 'meaningful' risk of liquidation.

iirc, i was really trying to respond to someone who was making the opposite point i am, that ETFs are somehow WORSE than mutual funds and ARE at risk of liquidation. again, it depends on the ETF, but i was speaking specifically to the fundamental structure of ETFs as a vehicle...
Got it. Thanks.

To close the loop, I think you are saying that with less-liquid assets, in theory, in ETFs, minor divergences from NAV act as a safety valve, while in mutual funds, the requirement of redemption at NAV could in theory cause a run on the fund that could blow up the fund, and therefore ETFs have a structural superiority even if it is not important in practice. RIght?
That is a good description of my understanding.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

Merrill Edge prevented me from buying QQQJ (referred to earlier in the thread as an ARKK substitute ) on the grounds that this was 'a restricted security'. !

Inside Dealings ! Payoffs ! Why isn't the SEC investigating this instead of GME ?

More seriously, ME does have an annoying habit of restricting certain securities, even liquid securities, without warning. No big deal for me, since I have accounts elsewhere.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

SlowMovingInvestor wrote: Thu Mar 18, 2021 12:41 pm Merrill Edge prevented me from buying QQQJ (referred to earlier in the thread as an ARKK substitute ) on the grounds that this was 'a restricted security'. !

Inside Dealings ! Payoffs ! Why isn't the SEC investigating this instead of GME ?

More seriously, ME does have an annoying habit of restricting certain securities, even liquid securities, without warning. No big deal for me, since I have accounts elsewhere.
Are you authorized for options trading and margin?
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by SlowMovingInvestor »

watchnerd wrote: Thu Mar 18, 2021 2:30 pm
SlowMovingInvestor wrote: Thu Mar 18, 2021 12:41 pm Merrill Edge prevented me from buying QQQJ (referred to earlier in the thread as an ARKK substitute ) on the grounds that this was 'a restricted security'. !

Inside Dealings ! Payoffs ! Why isn't the SEC investigating this instead of GME ?

More seriously, ME does have an annoying habit of restricting certain securities, even liquid securities, without warning. No big deal for me, since I have accounts elsewhere.
Are you authorized for options trading and margin?
Not in that account, I just asked for permission. But they didn't tell me to apply for permission when I tried earlier, they just said the security was 'restricted'. It's happened to me before too for other securities.

No reason options trading permission should be required for buying these securities either.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

SlowMovingInvestor wrote: Thu Mar 18, 2021 3:07 pm

No reason options trading permission should be required for buying these securities either.
Unless they just use it as administrative short hand for "not a newbie investor", which they might.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by rich126 »

The one thing that I have seen posted that troubles me is buying on the way down. If you have a stock with solid earnings and it drops usually it is because either the outlook for the stock has changed or the market overall drops and often good stocks end up taking a hit as well.

Many of these tech stocks have very low earnings, if any, and are priced very high with people hoping continued growth will lead to earnings that just the price. That won't happen to most of these. Others may get acquired prior to reaching expected growth/earnings

Buying on dips for many of these stocks will likely be painful. I watched guys in the late 90s acquire nice profits on Internet stocks but then as they began to fall they would take it as a buying opportunity. Unfortunately eventually they continued to fall and people lost all of their profits and more.

Zoom has lost 30% this year and is still trading at a pe over 140. Zoom will likely be around for a while but I would not say it is a good investment right now.
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Re: Why the disdain for managed funds like ARKK that destroy total market funds?

Post by watchnerd »

rich126 wrote: Thu Mar 18, 2021 3:47 pm The one thing that I have seen posted that troubles me is buying on the way down. If you have a stock with solid earnings and it drops usually it is because either the outlook for the stock has changed or the market overall drops and often good stocks end up taking a hit as well.

Many of these tech stocks have very low earnings, if any, and are priced very high with people hoping continued growth will lead to earnings that just the price. That won't happen to most of these. Others may get acquired prior to reaching expected growth/earnings

Buying on dips for many of these stocks will likely be painful. I watched guys in the late 90s acquire nice profits on Internet stocks but then as they began to fall they would take it as a buying opportunity. Unfortunately eventually they continued to fall and people lost all of their profits and more.

Zoom has lost 30% this year and is still trading at a pe over 140. Zoom will likely be around for a while but I would not say it is a good investment right now.
Buying in the dip can turn into catching a falling knife.
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