Follow-up Walmart Poll

[Ottawa]

I don't believe there is any absolute correctness in anything we do.  So, why pretend there is?  Unless you have an example :-)

Then why try to claim a moral high ground on not shopping at a business while simultaneously investing in them?

Because the situations are not analogous, no matter how much you keep trying to pretend that they are. Shopping at Wal-Mart is a conscious choice to pick it in preference to every other store every time you go in there. Owning WMT as part of an index fund, on the other hand, is not a choice to prefer Wal-Mart, but rather merely to accept it.

If there were some magic way to fractionally shop at all stores simultaneously, then the situations would be analogous and your criticism of avoiding Wal-Mart would have some validity.

It's just as easy to not buy an index fund (which contains shares of a company whose practices you don't approve of) as it is to not shop in a particular store.

Easier, for some, whose only close store is a Wal Mart.

You are choosing index funds because you think that's the best way to invest, and damn the fact that it means you are investing in companies you don't support philosophically.  Index funds aren't the only way to invest (indeed, they aren't even the most popular, nor are they even the most popular on most personal finance sites - I'd give that title to dividend investing, such as Dogs of the Dow and similar strategies).

You have to buy food, you don't have to invest in a particular company.  There are usually alternatives for the latter (other stores nearby). There are always alternatives for the former (invest in a different way).

You're just choosing the index funds because you think it will make you the most money, regardless of what companies are in that index.

That's fine, I'm good with it, it's just disingenuous to then claim moral high ground when you don't shop at that company while investing in it (and then go further and claim you have to way to invest in an index without that company, so your hands are tied.. Hah.)

Arebelspy - I'm glad you found your dog!

It's just as easy to not buy an index fund (which contains shares of a company whose practices you don't approve of) as it is to not shop in a particular store.

Bollocks!  Not if you want to mitigate risk.  After all, I'm here to enjoy (read low stress) the journey towards early FI.  I will passively (index) invest.  There are few options here that take little of my time.  I've outlined my option somewhere above. 

You are choosing index funds because you think that's the best way to invest, and damn the fact that it means you are investing in companies you don't support philosophically.  Index funds aren't the only way to invest (indeed, they aren't even the most popular, nor are they even the most popular on most personal finance sites - I'd give that title to dividend investing, such as Dogs of the Dow and similar strategies

I agree!  They are the easiest way to invest for the reasons I outlined in the post response to grantmeaname above!  Of course there are other choices.  There are always other choices.  I understand what you are hammering on about here.  However, the black and white I keep coming at you with is with respect to the way that I SEE THIS CHOICE from a philosophical standpoint.  Firstly, I tend to do a lot of research when I make any significant choice (house, investments etc).  When I come up with an objective set of reasons for choosing one investment strategy that fits my criteria...that's the one I choose.  There are always pros and cons in the list of any choice we make.  Usually, we choose something on the basis of the pros outweighing the cons.  So, in this case, the philosophical issue I have with companies like WMT are outweighed by the pros.  Furthermore, I can set up a mitigating subset of choices for Walmart itself.  This, I outlined above.  I offset the con of investing with the company in my index basket by NOT CHOOSING to shop there.  This, in my view is making the best choice given my views.  Bear in mind, I am not some sort of hard core follower of philosophies - there is such a thing as flexibility in exercising the choices we make.  To be rigid in any view is stressful and counter productive to the anticipated outcome (happiness and FIRE). 

You have to buy food, you don't have to invest in a particular company.

Not true:  You can forage, grow your own and barter.  True: You don't have to.

That's fine, I'm good with it, it's just disingenuous to then claim moral high ground when you don't shop at that company while investing in it (and then go further and claim you have to way to invest in an index without that company, so your hands are tied.. Hah.)

Not claiming moral high ground...nowhere is that suggested.  Merely making the best personal choices that I can under the conditions I work within.  Hands not tied.

[grantmeaname]

1) Passive investments outperform active consistently.  There is no dispute here.

There's entirely a dispute there. The best predictor of investment returns is fees, not strategy. What you meant to say is that funds with low expense ratios outperform funds with high expense ratios consistently.

2) Passive investments are SIGNIFICANTLY lower wrt MER.  There is no dispute here.

Read a little more attentively. I said 'some actively managed funds have low fees', not 'on the whole actively and passively managed funds have the same fees'.

I'm not going to argue passive versus active (I'm actually on your side on that)

Do you have any evidence that passive funds as a class outperform active funds as a class without fees taken into consideration? Or any other reason to suspect that a low-fee index fund would outperform an equally low-fee active fund?

[Ottawa]

1) Passive investments outperform active consistently.  There is no dispute here.

There's entirely a dispute there. The best predictor of investment returns is fees, not strategy. What you meant to say is that funds with low expense ratios outperform funds with high expense ratios consistently.

2) Passive investments are SIGNIFICANTLY lower wrt MER.  There is no dispute here.

Read a little more attentively. I said 'some actively managed funds have low fees', not 'on the whole actively and passively managed funds have the same fees'.

I'm not going to argue passive versus active (I'm actually on your side on that)

Do you have any evidence that passive funds as a class outperform active funds as a class without fees taken into consideration? Or any other reason to suspect that a low-fee index fund would outperform an equally low-fee active fund?

Untrue.  It is a combination of fees and strategy.  I don't think you read the link I sent...and, more importantly the research papers linked within it!  Also, why would you dismiss half the equation?  The fee side?  That makes no sense.

Here is a direct link to just one paper: http://www.rickferri.com/WhitePaper.pdf  Note there are about 17 references at the end of this paper if you feel like reading EVEN MORE about this debate...I'll let arebelspy provide more on this too...since we are in agreement on this aspect of things :-)

[grantmeaname]

The Rick Ferri whitepaper you linked, his blog on the whole (which I've been reading for over a year), and literally every other analysis of passive vs. active I've ever seen in about a hundred hours of reading on investments has compared low-fee index funds to the higher-fee general active mutual fund category. I explicitly addressed that already in my last post.

Edited to add:

Also, why would you dismiss half the equation?  The fee side?  That makes no sense.

Low fee active funds are available, and many of them don't own Walmart. What I'm arguing is that if you were offended by the actions of Walmart, you could go buy those funds for your equity holdings and be just as well off. It doesn't matter that some equity funds have a three percent expense ratio, because I'm not recommending you go buy one. I'm recommending you go buy a 20 basis point active fund that doesn't hold WMT instead of a 20 basis point passive fund that does if you have a pathological aversion to the company (or, equivalently, that a 30bp active fund can only be expected to underperform a 22bp index fund by 8 basis points annually and if you really think the company is evil that should be a cost you're happy to pay).

[Ottawa]

The Rick Ferri whitepaper you linked, his blog on the whole (which I've been reading for over a year), and literally every other analysis of passive vs. active I've ever seen in about a hundred hours of reading on investments has compared low-fee index funds to the higher-fee general active mutual fund category. I explicitly addressed that already in my last post.

Well then, do you have a specific instrument in mind?  In order to compare a passive fund you should probably have an active fund that follows a similar investment style.  I.E. Yield weighted dividend payer.  It wouldn't be hard to compare...just back test it including fees of course. 

[grantmeaname]

Well then, do you have a specific instrument in mind?  In order to compare a passive fund you should probably have an active fund that follows a similar investment style.

I own VTSMX and VGTSX because I think Walmart does more good than harm. Off the top of my head, though, American Funds Growth Fund of America and Vanguard PRIMECAP (which is temporarily closed to new investors) both have low expense ratios, hold mostly large-cap stocks, and (as it takes fifteen seconds to verify) hold no WMT.

[Fletch]

My personal beliefs influence my choice, few times a year. For me the key word is choice: usually I can avoid it, but if they are the only store open and I need something, and it is a legitimate need that cannot wait, then sure I go there. It isn't a moral high ground, it's a good enough moral middle ground. Same thing with investing: would not buy the individual stock, but would buy an index fund with Walmart holdings if it was a better choice for other reasons (like some of the reasons Ottawa mentioned). My personal beliefs about Walmart are not the only factor or the most important factor in the decision making process.

[Ottawa]

Well then, do you have a specific instrument in mind?  In order to compare a passive fund you should probably have an active fund that follows a similar investment style.

I own VTSMX and VGTSX because I think Walmart does more good than harm. Off the top of my head, though, CANADIAN NATURAL RESOURCES LTD and Vanguard PRIMECAP (which is temporarily closed to new investors) both have low expense ratios, hold mostly large-cap stocks, and (as it takes fifteen seconds to verify) hold no WMT.

Before we go any further down this rabbit hole...know that WMT is just one example of a company that has some aspect of business practice/model that I don't agree with.  It doesn't matter what index fund you point out - there will be companies within it that every investor (with any level of moral ground) will dislike (at least some aspect of their business practice).  For instance American Funds Growth Fund of America incorporates CANADIAN NATURAL RESOURCES LTD - which owns some juicy TAR SANDS in western Canada (it took me 10 seconds to find this).  I don't think anyone would be proud to say they own this shit.  an aside - a MER of 0.71% for  is more than DOUBLE what my average MER is.  That is not cheap. 

My personal beliefs influence my choice, few times a year. For me the key word is choice: usually I can avoid it, but if they are the only store open and I need something, and it is a legitimate need that cannot wait, then sure I go there. It isn't a moral high ground, it's a good enough moral middle ground. Same thing with investing: would not buy the individual stock, but would buy an index fund with Walmart holdings if it was a better choice for other reasons (like some of the reasons Ottawa mentioned). My personal beliefs about Walmart are not the only factor or the most important factor in the decision making process.

You get it!

[arebelspy]

Not claiming moral high ground...nowhere is that suggested. 

It sure was.  But notice that I wasn't replying to you.

You may not be claiming a moral high ground, because you know you don't have ground to stand on, and are okay with that.

I'm explicitly talking about someone like Jack, who has almost the same avatar as you when you just glance at it quickly, or others in this thread, who think investing in a company while boycotting buying from them is morally superior because they aren't supporting a company they don't approve of.  They are.  You just recognize that you are, and don't care, because diversification is more important than morals to you.

[Ottawa]

Not claiming moral high ground...nowhere is that suggested. 

It sure was.  But notice that I wasn't replying to you.

You may not be claiming a moral high ground, because you know you don't have ground to stand on, and are okay with that.

I'm explicitly talking about someone like Jack, who has almost the same avatar as you when you just glance at it quickly, or others in this thread, who think investing in a company while boycotting buying from them is morally superior because they aren't supporting a company they don't approve of.  They are.  You just recognize that you are, and don't care, because diversification is more important than morals to you.

Whew!  I was worried that my articulation was disarticulated!  I can move on now  :-)

Addendum: I saw Jack's avatar...it is also black and white...and now I know you see otherwise ;-)

[Simple Abundant Living]

If personal beliefs includes not wanting to deal with people if Walmart, then yes.  Otherwise no.

http://www.peopleofwalmart.com/

This.  Seriously, I don't see these people anywhere else I shop.  Walmart is their mothership.
 
Also, the long lines.  And their customer service return line.  And a lot of their merchandise is crap. 

I answered once a month, because every other blue moon I use the convenience of Walmart since it is the closest super store to me.  And I hate myself the whole time. 

[LalsConstant]

Again the ex Walmart employee here.  I do still shop there.  Post in the other thread kind of covers it but honestly I don't think avoiding Walmart on some kind of principle accomplishes much.  If Walmart vanished tomorrow something functionally identical would replace it.