

Fidelity's new funds look to exploit index investing's weak spots - cowsandmilk
http://www.reuters.com/article/2013/12/18/funds-fidelity-corporate-idUSL2N0JW15V20131218

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Tomte
If you accept the premise of an efficient market (as most index investors
probably do), then Fidelity's argument is bullshit.

They say index funds have to follow the index, and -- in this concrete example
-- buy Facebook, because it's going to be included in the S&P500.

That's true.

Unfortunately S&P management did not whisper this little piece of insider's
information into Fidelity's ear. It's public knowledge. And so other actors
besides index funds have already tried to exploit that nugget of information.
Just as Fidelity is doing.

So it's already been priced in.

The hypothesis of an efficient market does not assume that all actors in the
market are actively exploiting every bit of information, just enough of them
to move prices to their "fair" points.

If you don't accept the premise of an efficient market, then index funds don't
interest you much and you have other strategies to follow.

