I quite liked this debate between @jonstewart and WSJ journalist @Spencerjakab who disagreed with @TheProblem episode about the APE movement and #PFOF
His point: Retail should know better than to trade on platforms like @RobinhoodApp and just invest in index funds.
My take:
His point: Retail should know better than to trade on platforms like @RobinhoodApp and just invest in index funds.
My take:
https://twitter.com/TheProblem/status/1501978119460249608
This seems to be a popular opinion for people defending our market structure and putting it back on retail for being stupid enough to trade in the first place.
I am a huge fan of investing in index funds but I also find this POV quite condescending and strongly disagree with it
I am a huge fan of investing in index funds but I also find this POV quite condescending and strongly disagree with it
Index funds also do a lot better than active funds on average. Nobody tells the active funds to not trade in stock markets.
Leveraged funds lose money all the time (e.g. Archegos capital, LTCM) - noone says that they should stop investing.
Leveraged funds lose money all the time (e.g. Archegos capital, LTCM) - noone says that they should stop investing.
When recently @LME_news busted trades for busting trades - institutional investors were up in arms (rightly so)- nobody told them to suck it up and shut up. But when it happened to APEs and they couldn’t buy a crowded trade they are somehow expected to suck it up and shut up.
Its a free country and people should be able to invest and participate in the stock market in any form they like - through funds or directly in stocks. Stock market should allow all participants retail, institutions, market makers and prop to transparently trade with each other.
Everyone should be able to buy at the lowest price a seller is willing to sell at and sell at the highest price a buyer is willing to buy at.
To the contrary our structure cuts off the retail investors from institutional investors and 99% of market makers.
To the contrary our structure cuts off the retail investors from institutional investors and 99% of market makers.
thus increasing information asymmetry, reducing competition, making the price discovery less robust and increasing systemic risk.
Result: Higher implicit costs for both institutional and retail investors to provide for a windfall for a couple of large intermediaries.
Result: Higher implicit costs for both institutional and retail investors to provide for a windfall for a couple of large intermediaries.
Ultimately retail investors get hurt whether they invest directly or through a fund in their retirement account.
TL;DR:
Lack of investor education should not be an excuse for a poor market structure.
TL;DR:
Lack of investor education should not be an excuse for a poor market structure.
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