Posted by on Feb 2, 2020 in Articles & Advice, Blog, Books, Columns, Featured |

Image Credit: Alex Nabaum



By Jason Zweig | Jan. 31, 2020 11:00 am ET


For years, critics have accused index funds of mechanically buying stocks no matter how much they go up. Now the naysayers have a new critique: Index funds can also mechanically buy stocks no matter how much they go down.

Consider the strange situation at the SPDR S&P Dividend exchange-traded fund, with $20.6 billion in assets. Over the past three years, the ETF nearly quintupled its holdings in Tanger Factory Outlet Centers Inc. — even as shares in the shopping-property owner fell nearly 60%. By the end of 2019 the fund owned an immense 22.6% of Tanger’s stock. (Other ETFs held another 20%.)

Now that Tanger’s stock has halved, the fund has to sell. Short sellers, who bet on falling prices, smell blood and have been swarming Tanger. The shares slumped 10% in two days in late January on record volume, then bounced back….


To read the rest of the column:


For further reading:


Benjamin Graham, The Intelligent Investor

Jason Zweig,The Devil’s Financial Dictionary

Jason Zweig, Your Money and Your Brain

Jason Zweig, The Little Book of Safe Money


Articles and other resources:

Maureen O’Hara and Ayan Bhattacharya, “ETFs and Systemic Risks” (CFA Research Foundation, 2020)

Itzhak Ben-David et al., “Do ETFs Increase Volatility?” (Journal of Finance, 2018)

James J. Rowley Jr. et al., “Setting the Record Straight: Truths About Indexing” (Vanguard, 2018)

Itzhak Ben-David et al., “Exchange Traded Funds” (Annual Review of Financial Economics, 2017)

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The Market Really Is Different This Time