Comment by bryanlarsen

4 days ago

My comment was originally much larger, but I trimmed it because it was muddying my original point.

Yes, you can choose an index fund that's not cap-weighted S&P 500. However, any index fund that didn't have a substantial portion of its investments in NVDA and friends did very poorly over the last few years.

So either way, you're screwed.

- If your index has a lot of NVDA et al, you're exposed to lots of risk.

- If it doesn't, your investment values are currently a lot lower than they otherwise have been.

So ideally you would be in cap-weighted S&P now and for the last few years, and switch just before the seemingly inevitable crash.

But that's no longer "put it in an index fund and forget about it".

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bryanlarsen

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twic  4 days ago

You're certainly right that indexes like these don't benefit from the bubble!

But it's not the case that they "did very poorly". Forgive the UK sources, but compare HMWO (an MSCI World ETF) [1] and PSRW (a RAFI All World 3000 ETF) [2]. These are world indexes, but that's 70% US or something. For the last five years:

  Date         HMWO   PSRW
  07/24-07/25  15.77  13.49
  07/23-07/24  18.46  14.35
  07/22-07/23  13.86  13.87
  07/21-07/22  -9.06  -4.93
  07/20-07/21  35.31  38.57

It's a small difference. For a set-and-forget investment that insulates you from an AI bubble collapse, it's absolutely fine.

Funnily enough, if you go further back, the RAFI index is actually further behind. No idea what that's about.

[1] https://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Do...

[2] https://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Do...

  • bryanlarsen  4 days ago

    HMWO is 5.5% NVDA. It's not significantly different from the S&P 500. Any world cap-weighted index is going to have the same issue.

    • twic  3 days ago

      Exactly, yes. HMWO is the "normal" cap-weighted fund here, PSRW is the RAFI fund.