I suspect you are correct.Because the plain fact is that the 500 fund isn't getting killed by churn at the bottom. Arnott is just making up a backtest which he arbitrarily applies to a subset of the market that happens to be those stocks going in and out of the index. And then, from that subset, he claims to be able to predict which stock prices will go up and which stock prices will go down.
That was my question. Yet looking at total market the 28 year return was almost identical to the S&P 500 fund.
If the 500 fund is getting killed because of this bottom end churn, one would think that an extended market fund would benefit because those funds are typically everything except the top 500. Yet the return on that fund is slightly less but very close to the 509 and total market fund
As I said above, its just a gimmick to peel off a few billions from the trillions in the 500 index funds. Like robo-callers, when trillions are your target you just have to find a small percentage of suckers to make yourself a billionaire.
Also, best I can tell, part of the problem was the Op Article author - he basically compared this backtested portfolio to the S&P 500 that supposedly beat the 500 by .69, and attributed that difference to the churn. Best I can tell Arnotts article doesn’t attribute the churn impact to be nearly as high. It almost seems mathematically impossible. Part of Arnotts article also is talking about how the biggest holdings tend to underperform, which seems like it in itself methodologically problematic.
Statistics: Posted by JBTX — Sun Sep 14, 2025 12:16 pm — Replies 24 — Views 3093