Author Topic: Value vs. Indexing Today  (Read 5206 times)

Jurgis

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Re: Value vs. Indexing Today
« Reply #20 on: January 29, 2016, 07:01:36 AM »
I finally started indexing in my 401k last year.
It took me almost twenty years to not be so stupid.
My cost in that fund (S&P 500) is two basis points.
If I switch jobs ,I may lost access to that fund, unfortunately.

401(k)s are easy... or are they?

There is usually no access to VTI or equivalent. So I do synthetic VTI by splitting SP500 + midcap/smallcap whatever is available. Possibly waste of fees.

I put 40% into international funds. Possibly waste of fees and performance. For last 5+ years international has underperformed hugely. Will it revert?

I put 20% into bonds/cash. Well, this is per-person decision, so that's not very interesting.

I guess out of these, the biggest and most interesting decision is whether to put money into international or not.


Lupo Lupus

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Re: Value vs. Indexing Today
« Reply #21 on: September 24, 2017, 03:21:40 AM »
"Value" functions in a world of classic macroeconomics: the distribution of limited resources.

What happens when technology and society advances to the point where "limited" resourced become much less limited?

huh, can you elaborate?
OK so this is a totally half-baked futuristic scenario, but what happens to the economy when the marginal cost of production approaches zero?

Let's take Nike, in say 100 years (or however long). The world has fully transitioned to solar power and the price of oil has plummeted to practically nothing. The COGS of a Nike shoe is freakin' miniscule. They've got robots handling 99% of production at lightning fast speeds at mini-factories to minimize shipping costs. If the total cost of Nike shoe is $10 today, let's say its $0.25 in this futuristic world.

And it's not just Nike with minuscule costs of production, it's across the whole developed world. Self-driving cars has ensured auto insurance doesn't exist. Insurance brokers? There's an app for that. Manufacturing is about as hands-off as it gets. Planes fly themselves. Improved satellites mean the cost for a cell phone carrier is practically nothing for incredible bandwidth. The advancement of technology has made the cost of resources and production super low.

So a lot of people are not working in these areas, not making a salary, but on whole their quality of life is greater than it is today. But perhaps their wages are much lower. Does this mean the market price of a Nike shoe is going to drop from $150 to $20? Monetarily this reduces the discounted present value of Nike. But economically they are still just as valuable.

On a whole what does that world look like on a monetary vs. economic level (price vs. value)?

/super rambly post

I think you are discussing a very interesting scenario, and probably not an unlikely one! My take is that in such a world you would want to own brand companies, not commodity producers. Competition will drive the price on commodity products down to the costs, thus the benefits of lower production costs will be passed onto consumers. Brands (Nike!) on the other hand are priced according to their (perceived) value to consumers, thus they should see their margins improve with falling production costs...