I know this is not a stockpicker-forum (thank god ). But: As global wealth is rising, more people become shareholders and index investing becomes the new normal, could it make sense to invest in Vanguard, Blackrock as a so called ātiltā or āsatelliteā, as the financial marketing slang calls it?
Cons: Passive investing will probably never die, Vanguard & Blackrock however could be outperformed some day by a new better competitor.
And while weāre at it: What about owning some IB shares like owning a little bit of the casino while gambling?
Much like Iād try to diversify away from the sector I work in (and my own company) since an impact on the sector would also have an impact on my income prospects/employment situation, Iād try to diversify away from the companies which handle my investments (fraud would be my concern - unlikely but I see no reason to take a concentrated risk either).
Itās not necessarily a given either that your interests as a customer would meet your interests as a shareholder. For example, I do hold a few Swiss Life shares because I think life insurances arenāt going away in Switzerland but I wouldnāt use one of their solutions. The fact that they are good at making money at the expense of their clients (and the general public being so poorly financially educated) is what makes their future prospects worthwile in my opinion (I also donāt consider their business downright harmful: someone with no financial education and no desire to dive into it can get decent value out of some life insurance products and mortgages arenāt a bad model per se).
Iād also keep in mind that individual stocks are more volatile than diversified ETFs and do go to zero at times.
If you want to play the āpassive investing will never dieā theory, itās much better to invest into the shares of the index companies providing the indices. Both MSCI and SPGI (who computes the S&P500) charge:
an annual fee on the Assets Under Managements of funds tracking their indices
licensing fees to any fund being benchmarked against their indices (i.e, almost all funds).
In other words, even for the cheapest ETFs with as low as 0.03% TER, you can be sure that at least half of it goes to the index providerā¦
All they have to do is to compute daily their indices, and they get an annual share of the global wealthā¦ Itās hard to find better business modelsā¦
These are great points indeed, thanks guys, much appreciated. And yes of course, @Julianek , I forgot the index providers, definitely part of the package too !
I agree on this, but wouldnāt the very fact that customer and shareholder interests of, lets say, Blackrock, are not aligned provide a twisted form of diversification ?
Thatās not how I would approach stock picking, though I am no expert. Total market index investing is all about buying the haystack and the bad with the good, with an outlook that when all is said and done, the good will outweigh the bad.
Stock picking is more about making the case for an investment and investing only in the companies for which the case is made and makes sense. The companies you choose to work with as a customer must make the best possible sense for you as a customer, compared to all their competition (and the alternative of not buying anything in that category) and the companies you invest in as a shareholder must make the best sense for you investmentwise, compared to all the other investment opportunities that are on the table.
The two are not linked, unless your plan is to use your voting power to actively defend your interests as a customer, I donāt see inherent value in that approach (either the company you are doing business with meets your needs or not, and either the company you are investing in offers good prospects or not).
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). But: As global wealth is rising, more people become shareholders and index investing becomes the new normal, could it make sense to invest in Vanguard, Blackrock as a so called ātiltā or āsatelliteā, as the financial marketing slang calls it?
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