The Hugely Profitable, Wholly Legal Way to Game th
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Posted On: 07/07/2015 11:48:15 AM
The Hugely Profitable, Wholly Legal Way to Game the Stock Market
It’s an easy way to game the stock market, and getting easier by the day.
With some deft maneuvers, hedge funds and Wall Street trading desks are reaping hundreds of millions at the expense of index mutual funds, the investments of choice for a growing number of ordinary Americans.
The tactic, in some ways, resembles illegal front-running - - but in this case, it’s perfectly fine. The traders are simply buying stocks before they’re added to the indexes that, by definition, index funds must track.
As the popularity of index investing soars to new heights, the emergence of index front-running is raising fundamental questions about so-called passive investment strategies, as well as how indexes are compiled and the role the funds themselves play in elevating costs. By one estimate, it gouges owners of funds tracking the Standard & Poor’s 500 Index to the tune of $4.3 billion a year, a sum that can double or even triple the cost of such investments.
http://www.bloomberg.com/news/articles/2015-0...ock-market
It’s an easy way to game the stock market, and getting easier by the day.
With some deft maneuvers, hedge funds and Wall Street trading desks are reaping hundreds of millions at the expense of index mutual funds, the investments of choice for a growing number of ordinary Americans.
The tactic, in some ways, resembles illegal front-running - - but in this case, it’s perfectly fine. The traders are simply buying stocks before they’re added to the indexes that, by definition, index funds must track.
As the popularity of index investing soars to new heights, the emergence of index front-running is raising fundamental questions about so-called passive investment strategies, as well as how indexes are compiled and the role the funds themselves play in elevating costs. By one estimate, it gouges owners of funds tracking the Standard & Poor’s 500 Index to the tune of $4.3 billion a year, a sum that can double or even triple the cost of such investments.
http://www.bloomberg.com/news/articles/2015-0...ock-market
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