The Irrelevant Investor

"Capital" is just faceless organizations wanting to park their wealth somewhere to get a return.

40% of US corporate equity is owned by the foreign sector

40% is in tax-advantaged retirement accounts and pension funds as well as tax-advantaged non-profits.

20% is in various taxable accounts of US citizens and US based corporations.

source: https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/

It used to be that 70% of the stock market was owned by retirement funds, before we began accepting massive capital inflows from the foreign sector.

I guarantee you very few people who buy these portfolios even know the names of the businesses they own. There is nothing about "caring" involved in this equation. Nor is there anything about "loyalty". It's not a good idea to anthropomorphize capital markets, not if you are trying to understand them. People at a horse track placing bets on which horse is the fastest are not loyal to the horses, nor do they expect the horses to be loyal to them. If a horse doesn't run as fast, they just change the odds on that horse. Really, I think a poor understanding of both capital markets and banking is the main reason a lot of well-intentioned reforms end up being ineffective or backfiring. For example, you'd get a lot farther at promoting higher wages if you ban capital inflows than with unionization efforts.

You can't backtest a fund such as VTI. The issue is that these analysis don't take into factors such as volume. I'm sure if someone backtested $100MM investment in Bitcoin starting from 2010, the results would be spectacular, but we all know that buying pressure would've caused Bitcoin to skyrocket and the returns would be less than the backtested results.

I personally tell people to invest in index funds if they don't understand investing, but it doesn't mean it will do better than other options. Index funds are only a recent phenomenon.

The biggest issue with index funds at the moment is "group-think". If everyone in America is investing via index funds then when people need money, those same index funds will fall sharply. There is a valid line of thinking where one should avoid stocks with heavy exposure to index funds because those stocks will have the best returns during an equities downturn.

http://theirrelevantinvestor.com/2017/08/31/today-in-market-history-the-first-index-fund/

No this is actually true. Most stocks do go down (or at least only match much less risky investments like short-term bonds), but the stock market goes up because some stocks go up a lot. This is why all investors diversify. For example, the Russel 3000 Index goes up ~10% a year because they remove bad stocks and replace them with ones that seem better. But, employment at a single company with stock-based compensation is a concentrated bet on that single stock during the employment timeframe.

Recently learned this from the excellent and very pithy Michael Batnick blog https://theirrelevantinvestor.com/2020/09/10/most-stocks-suck/ who was citing https://wpcarey.asu.edu/department-finance/faculty-research/do-stocks-outperform-treasury-bills

I'm not trying to humanize Capital. There are plenty stock market analyses that matter-of-fact-ly complain about wages and demand more buybacks/dividends. And the profit have also been increasing more than wages or reinvestments.

To the extent the "new inequality" is these institutional investors, well it's "first time as tragedy, second time as farce" all over again.

> https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/

That's a neat graph. I would also like to see some measure of foreign assets with US owners to put that in perspective. "Foreigners" I also want to break down; that label makes it sound like all the rich individuals families went abroad (!), but I assume the foreign investors are institutional too?

The author's colleague had a blog post on the topic, reasoning that missing either the best or worst was not a particularly interesting "what-if" since the best and worst days are both associated with the same bouts of higher volatility. He used the 200 day moving average to try and model the effect of 'missing' both.
It honestly didn't turn out so bad, but one takeaway is that backtesting (aside from not being a necessarily great projection) does not model personalities.

https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-days-miss-the-best-days/

If you try to miss the bad/worst days you'll probably miss the best days:

* https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-days-miss-the-best-days/

* https://aaiila.org/wp-content/uploads/2020/05/Tuchman-Best-and-Worst-Days.pdf

* https://www.capitalgroup.com/individual/planning/investing-fundamentals/time-not-timing-is-what-matters.html

* https://www.cnbc.com/2021/03/24/this-chart-shows-why-investors-should-never-try-to-time-the-stock-market.html