[tombert]

Yeah, it really bothers me that as a society we've decided that ponzi schemes are actually fine as long as it has some loose "tech" branding associated with it. It seems like the startup strategy in Silicon Valley is "grow at all costs, worry about profit later, IPO, now it's the public's problem".

Of course someone could say "well they're not forcing you to buy the IPO'd stock!", and that's sort of true, but only in the strictest sense. My 401k, like I think nearly everyone's, is a mutual fund, and it invests in a little of everything. I also buy ETFs that do the same thing, because it's really the only way to preserve wealth, for better or worse. Even if I, for example, thought that WeWork's business model was unsustainable, I don't really have a way of "opting out" of buying their stock without effectively starting my own index fund, or having my cash lose value in an FDIC savings account.

[mandelbrotwurst]

Most (all?) retirement plans offer you some amount of choice in funds to invest in, and most companies of the sort you're describing are not included in many of the more popular indices. For example, WeWork was never in the S&P 500. Similarly, target date funds are one of the more popular investments options available as by default and/or recommendation in retirement plans. The first one I checked (Fidelity's Freedom Index) applies its U.S. allocation to large caps, which again means it does not include many of the companies you have in mind.

[tombert]

Fair enough, I guess if the company never makes it to the S&P500 or NASDAQ-100 you're mostly shielded from this stuff if you do the default funds. There are some questionable tech companies on the S&P, like Uber for example, but not as many and nothing as dumb as WeWork.

I have a lot of VTI stock right now, which if I understand correctly invests in basically everything in the America stock exchanges, though I guess an argument could be made that I should have known that dumb companies being included in there was always a risk.

Still, I don't have to like it, and I do think that a lot of these companies IPOing when they don't really have any way of actually making money is an issue waiting to happen.

[no_wizard]

VTI is a minimum ten year horizon type investment though, which is why it’s often praised by the Boglehead crowd.

Hold it for 10-30 years and it’ll be up and to the right. On average 10% gains in a year, though like anything it always fluctuates

[tombert]

I have absolutely no plans on selling my stock for the next ten years, but it still means that I'm investing in WeWork whether I like it or not.

I agree it's a good investment for long-term stuff, it's the fund that I recommend to everyone.

[mandelbrotwurst]

Yeah, I hear you. It definitely feels like there's been a shift toward investing based on sentiment rather than fundamentals, and there's certainly an argument to be made that's not a good outcome for society.

Personally I feel like it's a bigger issue for individual investors that in recent years companies now IPO only in later stages or not at all and that much of the more profitable bits of the growth curve are now accessible only to the private markets.

[lumost]

I believe Warren Buffet was opposed to robo-trading strategies for this exact purpose. If the bulk of the money is going to fund anything with a market cap greater than $X, then it is useful for VCs to pump a stock up to $(X + Y) market cap to acquire funding via rebalancing.

From a VC perspective, you can exit as other funds rebalance into the stock at the inflated valuation.

[wbl]

The beauty of market cap weighting is only entrance or exit forces a rebalance.

[lumost]

Would be quite interesting if WeWork et. al. were schemes by the financial backers to capitalize on cap weighting strategies. The folks involved would not have been opposed to this in the past.

[0xDEAFBEAD]

>I don't really have a way of "opting out" of buying their stock without effectively starting my own index fund, or having my cash lose value in an FDIC savings account.

Some other approaches:

* Buy long-dated put options for companies you think are overvalued, so your overall portfolio (retirement account+personal trading account) has 0 exposure to stocks you don't like. If a stock's price goes down, exercise the option before its expiration date and profit.

* Assemble a portfolio of sector ETFs and exclude the tech sector. Or buy regional ETFs in regions with low tech exposure. (If you're American, I recommend buying ex-America ETFs for hedging purposes anyways, since your career already gives you significant exposure to the American economy.)

Granted, you will be paying higher fees with these approaches, but given how dominant tech stocks are, if you really believe they are significantly overvalued, I think you should be willing to pay those higher fees.

[Timber-6539]

With an ETF you don't have to do any of this work. And generally, the market tends to go up not down. For most stocks. Even the ones you think are no good.

You are not going to make much shorting in general unless you have a nose for identifying the next Theranos et al.

[0xDEAFBEAD]

You're basically replying to tombert, not me. All I'm saying is, he has the opportunity to put his money where his mouth is if he really wants to. It's a funny definition of "no good" if you expect the stock to go up.

[red-iron-pine]

> I don't really have a way of "opting out" of buying their stock without effectively starting my own index fund, or having my cash lose value in an FDIC savings account.

I've done that, out of necessity -- the US IRS hates foreign ETFs, and I live out of the US.

Market movers are almost certainly a Parato 80/20 thing, and most of the growth of the stock market, or even the S&P, is in a handful of companies.

Find the prospectus of any local Index funds and then start looking at their top 50 picks; cross reference that with a few others. Pull the 20 that stand out the most.

[jjav]

> Of course someone could say "well they're not forcing you to buy the IPO'd stock!", and that's sort of true, but only in the strictest sense. My 401k, like I think nearly everyone's, is a mutual fund, and it invests in a little of everything.

Every 401k has multiple fund choices, so pick one that does not invest in recent IPOs.

In fact this should be very easy because most funds don't participate in recent IPOs! Depending on the 401k, you might not even have any fund that invest in recent IPOs.