Chart Of The Day - Funds vs Stocks

Too many funds? Too few stocks? Or something else...

US Listed Companies vs Investment Funds: You might be surprised to know that there are about the same number of investment funds as there are individual companies trading on the US stock exchanges. Basically a situation of a greater variety of ways of investing in the same set of companies (or more cynically, a larger crowd of funds chasing a smaller number of stocks!).

• It raises a few questions, for example, is there a shortage of listed companies? Are there too many investment funds? Is this a good thing or a bad thing?

• It also creates a new conundrum for investors, as the number of funds and number of stocks are now about the same — do you become a stock picker or a fund picker? Afterall one of the reasons for investing in a fund is to solve the problem of trying to pick the right stocks.

• But maybe it is a good thing; in theory greater competition should drive up quality and push down fees, not to mention perhaps even improve market efficiency. Well that’s the theory. At the very least, it’s an interesting chart to ponder.

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Thanks for your interest. Feedback and thoughts welcome in the comments.

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Callum Thomas
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