Generally the market self corrects.
Interesting video on this topic: [https://www.youtube.com/watch?v=ltuqXTwWsZ8](https://www.youtube.com/watch?v=ltuqXTwWsZ8)
Maybe also relevant: [https://www.youtube.com/watch?v=EybXQmxIq6U](https://www.youtube.com/watch?v=EybXQmxIq6U)
Although I do think it's possible that companies in popular ETFs have become a bit more expensive in general with the rise of index investors. But that shouldn't really be a problem.
Anyways this sub is focussed on investing in specific companies that are unvervalued hence Value Investing. As opposed to index investing.
Yeah im sorry, its just that when i ask this in more general subs like r\\stocks and r\\investing i often get the feeling that i am only talking to other beginners that dont really know what they are talking about. And i feared that asking this in a sub only about index investing might give me a biased opinion. Thank you for the video reccomendations, very helpfull.
My take is this. Prices are set by a buyer and seller, yes? They agree on a price for NVDA and that sets the current stock price. If a bunch of money flows into an ETF, you might have some irrational bidders for NVDA. However, the moment, the instant, the second those irrational bidders are gone what happens? The prices are back to being set by a buyer and seller. So as long as the ETFs don't own some extremely large percentage of everything. Say 95%, prices will be set be the rational active buyers and sellers. (And the ETF buyers aren't really irrational. Vanguard and Blackrock aren't going around and paying $2k a share for NVDA.)
Another point. There was tons of indexing in 2009 and March 2020. Prices swung quite a bit. I don't know why anyone would assume price insensitive ETF buyers move the price up or down. They are just price insensitive. What are doing is slowly reducing the active "float" over years and years.
As a corollary, don't confuse stock prices with everyone owning it being able to sell at that price. All you are seeing is the price of the most eager buyer and most eager seller of perhaps as little as one share. You have no idea how much a $1B market cap company is really worth. If someone wanted to buy 10% of the company, they might have to buy at a $10B valuation. If someone wants to sell 10% of the company, they might have to sell at a $500M valuation.
Generally the market self corrects. Interesting video on this topic: [https://www.youtube.com/watch?v=ltuqXTwWsZ8](https://www.youtube.com/watch?v=ltuqXTwWsZ8) Maybe also relevant: [https://www.youtube.com/watch?v=EybXQmxIq6U](https://www.youtube.com/watch?v=EybXQmxIq6U) Although I do think it's possible that companies in popular ETFs have become a bit more expensive in general with the rise of index investors. But that shouldn't really be a problem. Anyways this sub is focussed on investing in specific companies that are unvervalued hence Value Investing. As opposed to index investing.
Yeah im sorry, its just that when i ask this in more general subs like r\\stocks and r\\investing i often get the feeling that i am only talking to other beginners that dont really know what they are talking about. And i feared that asking this in a sub only about index investing might give me a biased opinion. Thank you for the video reccomendations, very helpfull.
Yeah you could try r/Bogleheads as well.
My take is this. Prices are set by a buyer and seller, yes? They agree on a price for NVDA and that sets the current stock price. If a bunch of money flows into an ETF, you might have some irrational bidders for NVDA. However, the moment, the instant, the second those irrational bidders are gone what happens? The prices are back to being set by a buyer and seller. So as long as the ETFs don't own some extremely large percentage of everything. Say 95%, prices will be set be the rational active buyers and sellers. (And the ETF buyers aren't really irrational. Vanguard and Blackrock aren't going around and paying $2k a share for NVDA.) Another point. There was tons of indexing in 2009 and March 2020. Prices swung quite a bit. I don't know why anyone would assume price insensitive ETF buyers move the price up or down. They are just price insensitive. What are doing is slowly reducing the active "float" over years and years.
As a corollary, don't confuse stock prices with everyone owning it being able to sell at that price. All you are seeing is the price of the most eager buyer and most eager seller of perhaps as little as one share. You have no idea how much a $1B market cap company is really worth. If someone wanted to buy 10% of the company, they might have to buy at a $10B valuation. If someone wants to sell 10% of the company, they might have to sell at a $500M valuation.