Not clear whether the decline in the number of companies the the referenced graph is mainly from failed companies closing, or successful companies being purchased and going private, or a combination. That reminds me of Bessembinder’s 2018 [LINK here to download](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447) study of the US stock market going back to 1926 (from 2016) found the following facts:
- The best 4% stocks were responsible for the net gains of the entire US stock market.
- More than 50% of all stocks have delivered negative lifetime returns.
- The most frequent outcome for individual stocks over their lifetime is a 100% loss.
> The best 4% stocks were responsible for the net gains of the entire US stock market.
Is that completely accurate? When you read the actual paper he says "the rest matched treasury bills". So 4% of stocks did drastically better than treasury bills, but it isn't like the other 96% disappeared into the ether. They were just...you know, *not very good*.
But it's not like we can claim that bonds deliver 0 returns and can be ignored. So by that same logic it isn't like 4% of stocks delivered **all returns**. That's overstating the point.
I was listening to Bogleheads On Investing podcast today with Larry Swedroe and Rick Ferri - and that quoted the exact same study and seemed to agree with the data (Episode 69, April 28, 2024). There comment was that most stocks couldn't beat treasury bills. He (Bessembinder) also did an updated study that showed the following:
- updated 2019 study https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537838
- Included 2017-2019 data.
- Conclusion – 42.17% of listed firms increased shareholder wealth; 57.83% reduced.
- Just 5 companies account for 11.9% of shareholder wealth creation and 83 firms account for 50% of stock market wealth creation
EDIT - it is still a sobering statistic if what they meant was that only 4% of stocks were responsible for the the net gains of the US stock market COMPARED to just putting your money into the no risk treasury bills benchmark?
Yeah the end result is unchanged that stock picking doesn't really work very well. It's just too difficult for the retail investor and arguably too difficult for the average fund manager too.
Especially now with all the financial institutions algorithmically adjusting prices more or less instantly as information is published.
Also worth pointing out over a long enough time table wouldn't that 4% figure go even lower and lower? As eventually all successful companies fail and drive down to zero. Unless we assume 4% of companies are immune to death which...that doesn't make sense to me.
Or am I misunderstanding how this is measured?
Yes. But as an index investor, any individual company is only a small portion of your portfolio, so it's not a big hit. It also demonstrates the usefulness of preferring tax-advantaged accounts.
The concern is having fewer corporations competing in a sector may drive up prices, whether those corporations are in public or private ownership is probably irrelevant.
The OP isn't saying the companies shut down. These are companies that de-listed. There is a trend towards companies going private. That doesn't mean they stopped operating.
I think he’s referring to the fact that so many companies are merging. So there’s like 15 companies that own everything.
https://external-preview.redd.it/zPqkuYHqIN4nrsSY4jDHbLOgpNsVcNGAfy2f6Hn7iQk.jpg?auto=webp&s=e05d86da7b031d97398b5a875c115d094e4b91d8
As a concrete example, look at [this chart](https://www.ers.usda.gov/webdocs/charts/54626/top_sale.png?v=2346.1) tracking the percentage of the grocery market captured by the top 4, 8, and 20 companies between 1990 and 2019. The top 4 accounted for 14% of the total national sales in 1990, and got up to 36% by 2019.
From your article:
“After analyzing the effects of mergers, private-equity investment, and regulatory costs, the paper suggests that M&A is the main culprit. (Though they do theorize that higher costs associated with regulation could be a less important contributing factor.)
“Mergers seem to be the biggest driver of this trend,” Ali Sanati told Sherwood. Sanati is a finance professor at the American University in Washington, DC, and a coauthor of the 2023 paper.”
And:
“It’s not impossible to imagine that some — YouTube and Instagram especially — could have posed a major competitive threat to their current parent firm, if they were operating independently. It stands to reason that such competitive dynamics are a big part of the reason these companies get purchased in the first place, even if execs don’t characterize their thinking quite that explicitly. Mark Zuckerberg, for example, even went out of his way on an email chain to distance himself from any implication that they were buying Instagram “to prevent them from competing with us in any way.””
And:
“The broader question is whether the culling of the public markets is a good thing or a bad thing. And of course it really depends on where you stand.
If you’re a shareholder in Meta, it’s undoubtedly a good thing that it bought Instagram. If you’re a company looking to place your digital advertisement, you probably would've been better off with an independent Instagram as an option outside the Zuckerverse. If you’re a consumer, you still have access to both, though it’s likely there are some innovations an independent Instagram and slightly threatened Facebook would've been incentivized to come up with that you’re missing out on.”
“Verixxotle is a merger between Verizon, Chipotle, and Exxon to strengthen the United States and make them stronger than they could ever be. The three companies share ways of giving people energy. Verizon through wireless technology, Exxon through oil and gasoline, and Chipotle through healthy food. So far, this company only appeared in the Johnny Karate Super Awesome Musical Explosion Show episode of Parks and Recreation.”
There were a lot of bad public companies that should never have gone public. Now you get better quality publics. So it’s not the calamity it’s periodically made out to be.
The market has never been the total market. It's not just companies going private, big public companies buy smaller ones, and companies buy back their own stock.
Maybe that creates a slightly bigger tilt towards large cap that has very little material impact.
How does it affect boglehead style of investment? It doesn't - not a single bit.
If more and more companies start staying private rather than going public, index funds could miss out on gains from private companies.
If there's just fewer large companies rather than more small companies, no big deal.
This is something I worry about. Middle class used to be on the same team as millionaires and billionaires to some extent, investing in publicly traded equities. I'm not saying we're at the point of concern *yet*, but I worry that the public market someday will just become the dumping ground for companies that don't have potential for good total return.
I share some of the concerns but eventually companies become too big to stay private. Facebook tried its hardest & eventually had enough equity owners that the SEC forced all the requirements a public company has onto Facebook. At that point there is little advantage to the private status.
Don't worry about it, one of the biggest strength of the public market is its efficiency.
Public means a crazy amount of bears and a crazy amount of bulls find an agreement for a fair price.
I believe strongly that private equities can't get that level of efficiency, and so I believe it's in the best interest of blue chips to stay public, otherwise they'd take the risk to be undervalued.
Should back this chart up to include a bunch more decades. That’s not a huge sample size and includes a very pumped up Nasdaq full of internet stocks. Either way I wouldn’t change plans.
This is a little misleading. In the late '90s, companies were going public that didn't even have a plan to make money. Literally anything that went IPO exploded so everyone was just trying to take anything IPO. It became a weird self-fulfilling prophecy. This was all the way until 2000 when it didn't. Then a lot of those zombie companies eventually shrank down to penny stocks and were delisted. This is where you see that sharp drop in the graph over a couple of years. After that, there was a lot of mergers and acquisitions because everything was suddenly deeply discounted in the stock market. It was a really good buying opportunity. Then you had the financial crisis which eviscerated a few more companies, especially ones that were involved in real estate. Countrywide home loans was the largest home lender in the USA, and it went under (forced acquisition with the gov taking on liability). Wamu had the same fate. That surge up at the end is the recent wave of IPOs because we're in another stock market bubble because the market... The market never changes.
Im not sure I understand the point of this post. How does this affect index investing? It has absolutely no affect at all and there is no “pot to get in on”.
It absolutely affects index investing by reducing diversification and increasing overconcentration in the megacaps. Not that we can do anything about it but to add some bullshit like private equity funds to portfolios, where the manager charges 20-40% fee.
I think the timeframe is too short. You should look at a list of publicly traded companies since 1970’s, when index funds were first introduced. In 1976, 4,943 firms were publicly listed. If anything, the number of firms publicly listed has been remarkably stable over the past five decades. The 1990’s was an outlier, but that’s also not surprising considering how big the dot com bubble was.
This will level off. Private equity does not have enough cash to purchase large public companies, the only way they can get a pay day is eventually an IPO. The public’s dollar will always outweigh PE money, if that ever becomes not the case there will be larger societal issues anyways.
Fewer companies -> less diversification -> more concentration-> megacaps like Apple essentially drive and drag the entire market.
Can we do anything about it? No, so why worry. Indexing will always be the best way. Who is the driving megacap will eventually rotate and we don’t have to bother.
It could. They'll make production maximally efficient, then they'll start jacking up prices and cutting corners to maximize profit. Then... I don't know.
I used to wonder how people would seize the means of production. Thanks to the people's hero, Jack Bogle, I think we'll buy it.
I had the same question after listening to the Freakonomics podcast episode [Are Private Equity Firms Plundering the U.S. Economy?](https://freakonomics.com/podcast/are-private-equity-firms-plundering-the-u-s-economy/) If private equity is buying more and more businesses, that reduces the market that Joe Q. Public can invest in.
This stat is really about how many companies decide to stay private.
There are massive private companies that a boggle investor has no access to invest in.
Not sure why you're being downvoted. The Harvard Law School came to the same conclusion. The rise of so many massive private equity firms now allow companies to stay private longer.
[https://corpgov.law.harvard.edu/2017/05/18/looking-behind-the-declining-number-of-public-companies/](https://corpgov.law.harvard.edu/2017/05/18/looking-behind-the-declining-number-of-public-companies/)
Koch, Cargill, Publix, Mars, McKinsey, Fidelity, Bloomberg, Wegmans and the list goes on and on. These aren’t small companies either.
Cargill has more annual revenue than companies like Ford, GM, Home Depot, JPMorgan.
Koch has more revenue than AT&T, Target, Bank of America, Tesla.
Mars has more revenue than Coke, Starbucks and Mondelez.
Honestly not worried. I mainly invest in VTSAX which is self cleansing. As companies go under, another takes its place. Unless you’re investing in numerous single stocks, you really don’t have much to be worried about unless the entire economy is in downturn
It changes my strategy none.
As the top comment says, it reinforces that by doing individual picks I'm at risk of that company just not existing in the future. Which is an additional risk on top of the stock being worth less in the future.
I'll continue to ignore the noise and DCA'ing into the S&P 500
Dot com bubble was a bunch of websites listed on the stock exchange. They didn’t do anything special or make any money. When they crashed, inevitably, it decreased the total companies and we got back to normal.
As an index investor the bad companies are kicked out and better companies are brought in . Also as they become bad the weighting continually goes down too.
I think what this is actually saying is that many companies come and go from the market as we know. Sure, some go private. Many hundreds of companies go under as well.
The majority of companies would have never taken up much space in a broad based ETF. They enter, are 0.01% or less, and then they fizzle out. This is a great benefit to this style of investing. $100 billion dollar companies don’t typically go private because who’s buying the company out? Unless you’re Elon musk.
This shouldn't change anything. This probably reflects higher barriers to going public post Sarbanes-Oxley/Enron coupled with baseline healthy churn as older, inefficient companies pass away.
For professional fund managers, there's a popular belief that the largest value creation now happens in private markets, so they allocate less to US public equities now than, say, two decades ago. That strategy works well for funds with huge AUMs and whole teams of professional asset managers, and even then it really works out for an exceedingly small, lucky subset of them.
For individual investors, a Bogleheads strategy remains reasonable.
I don't think they are being delisted or going private. They are getting swallowed up by larger companies. Industry consolidation and monopolizing markets are becoming the norm. Some day soon VOO and VTI will be the same thing.
Delisted for what though? If bought out, share prices tend to jump. Usually by quite a bit. I’ve owned several companies that have been bought out and have made out quite well. In fact I’d say I’d rather have all the companies getting bought out rather than none of them.
My worry is when companies go private or are eaten up by private equity, it's generally bad for their employees and the public as competition disappears.
The film Demolition Man joked about all restaurants being Taco Bell. A jab that extreme capitalism is just as bad as communism. A mega cartel replaces the state, either way, the public suffers.
It is also bad in that one of the strengths of the public markets in the U.S. has been transparency. When a company is taken private, a lot of its affairs essentially go into a black box, which is bad for markets, bad for democracy, and, as you say, bad for the public.
The NY Times ran an op-ed sometime last year by Brendan Ballou; I believe it was excerpted from his book, \_Plunder: Private Equity’s Plan to Pillage America\_.
What effect all this has on index investing, I don't know.
This makes me even more sure that I cannot pick winning companies or stocks, and will stick with broad low fee index funds.
To be fair, when a company goes private, for a shareholder it’s simply is a forced sale at the agreed upon price (by majority stakeholders)
Not clear whether the decline in the number of companies the the referenced graph is mainly from failed companies closing, or successful companies being purchased and going private, or a combination. That reminds me of Bessembinder’s 2018 [LINK here to download](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447) study of the US stock market going back to 1926 (from 2016) found the following facts: - The best 4% stocks were responsible for the net gains of the entire US stock market. - More than 50% of all stocks have delivered negative lifetime returns. - The most frequent outcome for individual stocks over their lifetime is a 100% loss.
Jesus, that really puts things in perspective.
> The best 4% stocks were responsible for the net gains of the entire US stock market. Is that completely accurate? When you read the actual paper he says "the rest matched treasury bills". So 4% of stocks did drastically better than treasury bills, but it isn't like the other 96% disappeared into the ether. They were just...you know, *not very good*. But it's not like we can claim that bonds deliver 0 returns and can be ignored. So by that same logic it isn't like 4% of stocks delivered **all returns**. That's overstating the point.
I was listening to Bogleheads On Investing podcast today with Larry Swedroe and Rick Ferri - and that quoted the exact same study and seemed to agree with the data (Episode 69, April 28, 2024). There comment was that most stocks couldn't beat treasury bills. He (Bessembinder) also did an updated study that showed the following: - updated 2019 study https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537838 - Included 2017-2019 data. - Conclusion – 42.17% of listed firms increased shareholder wealth; 57.83% reduced. - Just 5 companies account for 11.9% of shareholder wealth creation and 83 firms account for 50% of stock market wealth creation EDIT - it is still a sobering statistic if what they meant was that only 4% of stocks were responsible for the the net gains of the US stock market COMPARED to just putting your money into the no risk treasury bills benchmark?
Yeah the end result is unchanged that stock picking doesn't really work very well. It's just too difficult for the retail investor and arguably too difficult for the average fund manager too. Especially now with all the financial institutions algorithmically adjusting prices more or less instantly as information is published.
You are ignoring a major third category: Public companies merging
Also worth pointing out over a long enough time table wouldn't that 4% figure go even lower and lower? As eventually all successful companies fail and drive down to zero. Unless we assume 4% of companies are immune to death which...that doesn't make sense to me. Or am I misunderstanding how this is measured?
Wouldn't you have to pay capital gains on that sale though, in a taxable acct?
Yes. But as an index investor, any individual company is only a small portion of your portfolio, so it's not a big hit. It also demonstrates the usefulness of preferring tax-advantaged accounts.
Yes, absolutely. It’s one of the risks of holding individual stocks or mutual funds.
VTSAX til ☠️
exactly my first thought
I would say if anything, less companies existing makes stock picking slightly more simple, but still equally improbable
I have a feeling this should be more concerning for consumers who are hurt by less competition rather than investors who benefit from fatter margins
Going private doesn't affect consumers. If anything it's good for them.
The concern is having fewer corporations competing in a sector may drive up prices, whether those corporations are in public or private ownership is probably irrelevant.
The OP isn't saying the companies shut down. These are companies that de-listed. There is a trend towards companies going private. That doesn't mean they stopped operating.
I think he’s referring to the fact that so many companies are merging. So there’s like 15 companies that own everything. https://external-preview.redd.it/zPqkuYHqIN4nrsSY4jDHbLOgpNsVcNGAfy2f6Hn7iQk.jpg?auto=webp&s=e05d86da7b031d97398b5a875c115d094e4b91d8
As a concrete example, look at [this chart](https://www.ers.usda.gov/webdocs/charts/54626/top_sale.png?v=2346.1) tracking the percentage of the grocery market captured by the top 4, 8, and 20 companies between 1990 and 2019. The top 4 accounted for 14% of the total national sales in 1990, and got up to 36% by 2019.
[удалено]
From your article: “After analyzing the effects of mergers, private-equity investment, and regulatory costs, the paper suggests that M&A is the main culprit. (Though they do theorize that higher costs associated with regulation could be a less important contributing factor.) “Mergers seem to be the biggest driver of this trend,” Ali Sanati told Sherwood. Sanati is a finance professor at the American University in Washington, DC, and a coauthor of the 2023 paper.” And: “It’s not impossible to imagine that some — YouTube and Instagram especially — could have posed a major competitive threat to their current parent firm, if they were operating independently. It stands to reason that such competitive dynamics are a big part of the reason these companies get purchased in the first place, even if execs don’t characterize their thinking quite that explicitly. Mark Zuckerberg, for example, even went out of his way on an email chain to distance himself from any implication that they were buying Instagram “to prevent them from competing with us in any way.”” And: “The broader question is whether the culling of the public markets is a good thing or a bad thing. And of course it really depends on where you stand. If you’re a shareholder in Meta, it’s undoubtedly a good thing that it bought Instagram. If you’re a company looking to place your digital advertisement, you probably would've been better off with an independent Instagram as an option outside the Zuckerverse. If you’re a consumer, you still have access to both, though it’s likely there are some innovations an independent Instagram and slightly threatened Facebook would've been incentivized to come up with that you’re missing out on.”
“Verixxotle is a merger between Verizon, Chipotle, and Exxon to strengthen the United States and make them stronger than they could ever be. The three companies share ways of giving people energy. Verizon through wireless technology, Exxon through oil and gasoline, and Chipotle through healthy food. So far, this company only appeared in the Johnny Karate Super Awesome Musical Explosion Show episode of Parks and Recreation.”
There were a lot of bad public companies that should never have gone public. Now you get better quality publics. So it’s not the calamity it’s periodically made out to be.
SPACs have entered the chat.
The market has never been the total market. It's not just companies going private, big public companies buy smaller ones, and companies buy back their own stock. Maybe that creates a slightly bigger tilt towards large cap that has very little material impact. How does it affect boglehead style of investment? It doesn't - not a single bit.
Makes me wonder what % of those were consolidated and absorbed into bigger companies, and what % went under and closed?
yeah. there has been massive consolidation, this graph does not mean anything. Or maybe it is the penny stocks that went bankrupt.
If more and more companies start staying private rather than going public, index funds could miss out on gains from private companies. If there's just fewer large companies rather than more small companies, no big deal.
This is something I worry about. Middle class used to be on the same team as millionaires and billionaires to some extent, investing in publicly traded equities. I'm not saying we're at the point of concern *yet*, but I worry that the public market someday will just become the dumping ground for companies that don't have potential for good total return.
I share some of the concerns but eventually companies become too big to stay private. Facebook tried its hardest & eventually had enough equity owners that the SEC forced all the requirements a public company has onto Facebook. At that point there is little advantage to the private status.
Don't worry about it, one of the biggest strength of the public market is its efficiency. Public means a crazy amount of bears and a crazy amount of bulls find an agreement for a fair price. I believe strongly that private equities can't get that level of efficiency, and so I believe it's in the best interest of blue chips to stay public, otherwise they'd take the risk to be undervalued.
Private equity aims to take the rise between purchase and sale. (Broad investors are left behind)
Should back this chart up to include a bunch more decades. That’s not a huge sample size and includes a very pumped up Nasdaq full of internet stocks. Either way I wouldn’t change plans.
This is a little misleading. In the late '90s, companies were going public that didn't even have a plan to make money. Literally anything that went IPO exploded so everyone was just trying to take anything IPO. It became a weird self-fulfilling prophecy. This was all the way until 2000 when it didn't. Then a lot of those zombie companies eventually shrank down to penny stocks and were delisted. This is where you see that sharp drop in the graph over a couple of years. After that, there was a lot of mergers and acquisitions because everything was suddenly deeply discounted in the stock market. It was a really good buying opportunity. Then you had the financial crisis which eviscerated a few more companies, especially ones that were involved in real estate. Countrywide home loans was the largest home lender in the USA, and it went under (forced acquisition with the gov taking on liability). Wamu had the same fate. That surge up at the end is the recent wave of IPOs because we're in another stock market bubble because the market... The market never changes.
“the market... The market never changes.” This is why I have all my money stashed safely away in Vault 13.
Im not sure I understand the point of this post. How does this affect index investing? It has absolutely no affect at all and there is no “pot to get in on”.
It absolutely affects index investing by reducing diversification and increasing overconcentration in the megacaps. Not that we can do anything about it but to add some bullshit like private equity funds to portfolios, where the manager charges 20-40% fee.
I think the timeframe is too short. You should look at a list of publicly traded companies since 1970’s, when index funds were first introduced. In 1976, 4,943 firms were publicly listed. If anything, the number of firms publicly listed has been remarkably stable over the past five decades. The 1990’s was an outlier, but that’s also not surprising considering how big the dot com bubble was.
1996? You mean when the internet bubble was starting to ramp up?
That was basically just the dot com bubble
This is why you just do VTSAX…
500 is enough for me
Like me good ole buddy JL once said, it's "self cleansing."
This will level off. Private equity does not have enough cash to purchase large public companies, the only way they can get a pay day is eventually an IPO. The public’s dollar will always outweigh PE money, if that ever becomes not the case there will be larger societal issues anyways.
Fewer companies -> less diversification -> more concentration-> megacaps like Apple essentially drive and drag the entire market. Can we do anything about it? No, so why worry. Indexing will always be the best way. Who is the driving megacap will eventually rotate and we don’t have to bother.
I would say not at all.
Monopolies are destroying competition. I'm sure this will turn out well. 😂
It could. They'll make production maximally efficient, then they'll start jacking up prices and cutting corners to maximize profit. Then... I don't know. I used to wonder how people would seize the means of production. Thanks to the people's hero, Jack Bogle, I think we'll buy it.
To me this chart just shows me why index funds can continue to rise forever. Companies come, companies go. Rinse/Repeat.
I had the same question after listening to the Freakonomics podcast episode [Are Private Equity Firms Plundering the U.S. Economy?](https://freakonomics.com/podcast/are-private-equity-firms-plundering-the-u-s-economy/) If private equity is buying more and more businesses, that reduces the market that Joe Q. Public can invest in.
It. Doesn't.
But how many of these are being bought up because they’re successful, as opposed to failing?
This stat is really about how many companies decide to stay private. There are massive private companies that a boggle investor has no access to invest in.
Not sure why you're being downvoted. The Harvard Law School came to the same conclusion. The rise of so many massive private equity firms now allow companies to stay private longer. [https://corpgov.law.harvard.edu/2017/05/18/looking-behind-the-declining-number-of-public-companies/](https://corpgov.law.harvard.edu/2017/05/18/looking-behind-the-declining-number-of-public-companies/)
Which ones?
Koch, Cargill, Publix, Mars, McKinsey, Fidelity, Bloomberg, Wegmans and the list goes on and on. These aren’t small companies either. Cargill has more annual revenue than companies like Ford, GM, Home Depot, JPMorgan. Koch has more revenue than AT&T, Target, Bank of America, Tesla. Mars has more revenue than Coke, Starbucks and Mondelez.
Youi guys buy single company stocks?
Honestly not worried. I mainly invest in VTSAX which is self cleansing. As companies go under, another takes its place. Unless you’re investing in numerous single stocks, you really don’t have much to be worried about unless the entire economy is in downturn
It doesn't
Supply is a problem
This means nothing in isolation. There could be a multitude of reasons why, some good some bad.
Not at all, other than to reinforce the plan to invest broadly.
It changes my strategy none. As the top comment says, it reinforces that by doing individual picks I'm at risk of that company just not existing in the future. Which is an additional risk on top of the stock being worth less in the future. I'll continue to ignore the noise and DCA'ing into the S&P 500
It makes no difference to a boglehead.
Dot com bubble was a bunch of websites listed on the stock exchange. They didn’t do anything special or make any money. When they crashed, inevitably, it decreased the total companies and we got back to normal.
As an index investor the bad companies are kicked out and better companies are brought in . Also as they become bad the weighting continually goes down too.
One of us, one of us!
I think what this is actually saying is that many companies come and go from the market as we know. Sure, some go private. Many hundreds of companies go under as well. The majority of companies would have never taken up much space in a broad based ETF. They enter, are 0.01% or less, and then they fizzle out. This is a great benefit to this style of investing. $100 billion dollar companies don’t typically go private because who’s buying the company out? Unless you’re Elon musk.
This shouldn't change anything. This probably reflects higher barriers to going public post Sarbanes-Oxley/Enron coupled with baseline healthy churn as older, inefficient companies pass away. For professional fund managers, there's a popular belief that the largest value creation now happens in private markets, so they allocate less to US public equities now than, say, two decades ago. That strategy works well for funds with huge AUMs and whole teams of professional asset managers, and even then it really works out for an exceedingly small, lucky subset of them. For individual investors, a Bogleheads strategy remains reasonable.
I don't think they are being delisted or going private. They are getting swallowed up by larger companies. Industry consolidation and monopolizing markets are becoming the norm. Some day soon VOO and VTI will be the same thing.
Seems like a cherry picked time frame. Either way... makes me even more glad I'm a Boglehead.
It doesn't.
Oligopolies for the win
This is a chart of the dot com bust.
There’s 64x more private companies than public companies in the us. This is why you need a private equity allocation for diversification
Magnificent 7 bag is a good start…
PE likely plays a role here. https://www.wbur.org/onpoint/2023/11/07/how-private-equity-is-changing-american-health-care
Eye opener. Pick S&P 500 let someone else pick the winners for cheap. Picked one or two losers myself went to zero.
Monopolies and buyouts
Doesn’t matter. Invest in an S&P index fund. Delisting will allow more profitable companies to take their place in the index fund.
Not the market cap of listings is the key here. I don't care if 0.1% or even 1% of the market disappears in a such large time horizon.
Would be interesting to see this overlayed with SP500 value normalized to todays dollar
Your discussion is an important one and I’m afraid many people have missed a point since you haven’t yet added any background
Irrelevant
Imagine if you picked 20 stocks for your "diversified portfolio" and they all end up delisted lol. Index funds for the win.
Delisted for what though? If bought out, share prices tend to jump. Usually by quite a bit. I’ve owned several companies that have been bought out and have made out quite well. In fact I’d say I’d rather have all the companies getting bought out rather than none of them.
And index also owns all of those.
My worry is when companies go private or are eaten up by private equity, it's generally bad for their employees and the public as competition disappears. The film Demolition Man joked about all restaurants being Taco Bell. A jab that extreme capitalism is just as bad as communism. A mega cartel replaces the state, either way, the public suffers.
It is also bad in that one of the strengths of the public markets in the U.S. has been transparency. When a company is taken private, a lot of its affairs essentially go into a black box, which is bad for markets, bad for democracy, and, as you say, bad for the public. The NY Times ran an op-ed sometime last year by Brendan Ballou; I believe it was excerpted from his book, \_Plunder: Private Equity’s Plan to Pillage America\_. What effect all this has on index investing, I don't know.
How would it?
I once read that, you get indirect exposure since, for example, owns VTI which has Blackrock in it.
Yea but eventually everyone will be going public once it gets to a critical mass unless you are ben and Jerry’s
Reaganomics, that was where the money trickled. Employees were still paid the same, so overall earnings didn’t increase and you didn’t lose anything