Re: Investments

Michael Lorrey (retroman@tpk.net)
Fri, 13 Jun 1997 19:09:28 -0400


Hara Ra wrote:
>
> Max More wrote:
>
> > I read an article (in Fortune, I think) that warned investors to be careful
> > with index funds based on the Dow or the S&P 500. The writer noted that
> > these stocks may be overvalued because index investing has become so
> > incredibly popular that these stocks just keep getting pushed up.
>
> Despite their popularity I doubt that the index funds have a significant
> effect on the Dow or S&P 500, for the trading volume of the stocks being
> indexed is far larger that that of the index funds.
>

SUre but if you have even a few percent of the market responding to the
same signals at the same time, you'll get a cascade reaction. People
using the Motley Fools' Dow Dividend Theory of buying the five lowest
priced dow stocks at th beginning of each year leads to large selloff
pressures at the end of the year on that year's performers....

-- 
TANSTAAFL!!!
			Michael Lorrey
------------------------------------------------------------
mailto:retroman@tpk.net		Inventor of the Lorrey Drive
Agent Lorrey@ThePentagon.com
Silo_1013@ThePentagon.com	http://www.tpk.net/~retroman/

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