Wednesday, June 16, 2004
An "invisible hand" stock portfolio
As I've explained it's very hard to even equal the S&P 500 average
when buying a mutual fund. First of all 1/2 are always going to be
worse and second they all have fees of .5 - 2% for "management".
I suggest a fund based upon the philosophy of the wisdom of the
"invisible hand" of the market which is supposed to guide things to
the optimal price.
Let's create a fund which buys basically the S&P 500 as do all the others,
but with a difference as to how trades are determined. After creating
a fund with a representative balance of stocks in it the participants
vote each month on how to rebalance the fund.
I'm assuming that the fund would be used by long-term inverstors that are
putting it into an IRA or similar so that the amount flowing in would be
greater than the amount flowing out, but not by much. So the major function
of trades would be to invest the new funds deposited.
Each participant would get a vote (or perhaps proportional to the size
of their holdings) for a stock to reduce in the portfolio. This would be
optional, there is no reason to reduce a stock if everything is currently
OK. In any case the amount of reduction could not exceed a small percentage
of the total amount held, say 10% in any month.
In addition the participant would get a vote on which stock to increase
investment in with the new funds as well as any from the sale. If the
theory is of the "invisible hand" is correct the fund should do better
than the average because of the collective wisdom of the participants.
At least the transaction costs would be minimal and the need for high-priced
financial "advisors" would be eliminated.
Anyone interested in creating a virtual fund online to see how it fares?
when buying a mutual fund. First of all 1/2 are always going to be
worse and second they all have fees of .5 - 2% for "management".
I suggest a fund based upon the philosophy of the wisdom of the
"invisible hand" of the market which is supposed to guide things to
the optimal price.
Let's create a fund which buys basically the S&P 500 as do all the others,
but with a difference as to how trades are determined. After creating
a fund with a representative balance of stocks in it the participants
vote each month on how to rebalance the fund.
I'm assuming that the fund would be used by long-term inverstors that are
putting it into an IRA or similar so that the amount flowing in would be
greater than the amount flowing out, but not by much. So the major function
of trades would be to invest the new funds deposited.
Each participant would get a vote (or perhaps proportional to the size
of their holdings) for a stock to reduce in the portfolio. This would be
optional, there is no reason to reduce a stock if everything is currently
OK. In any case the amount of reduction could not exceed a small percentage
of the total amount held, say 10% in any month.
In addition the participant would get a vote on which stock to increase
investment in with the new funds as well as any from the sale. If the
theory is of the "invisible hand" is correct the fund should do better
than the average because of the collective wisdom of the participants.
At least the transaction costs would be minimal and the need for high-priced
financial "advisors" would be eliminated.
Anyone interested in creating a virtual fund online to see how it fares?
Saturday, June 12, 2004
Musings on Social Policy
After listening and reading to a great deal of material about public and social policy. I have come to the conclusion that some areas of a more general nature
have not been considered as much.
To make my small contribution to the discussions I've written a short group
of mini essays and posted them online.
I'm old school enough that I still prefer to have control over the layout as
well as the content so these discussion are in the form of regular web pages.
I would be pleased if you would view them at my web site:
http://robertdfeinman.com
Follow the link to "Musings on Society and Public Policy".
You are, of course, welcome to view the large collection of photographs and
tips for photographers as well.
have not been considered as much.
To make my small contribution to the discussions I've written a short group
of mini essays and posted them online.
I'm old school enough that I still prefer to have control over the layout as
well as the content so these discussion are in the form of regular web pages.
I would be pleased if you would view them at my web site:
http://robertdfeinman.com
Follow the link to "Musings on Society and Public Policy".
You are, of course, welcome to view the large collection of photographs and
tips for photographers as well.
