Rob Arnott on The Upside of Getting Dumped: Investing in Index Deletions | #549
Today’s returning guest is Rob Arnott, founder and Chairman of Research Affiliates. In today’s episode, Rob discusses his newest article, ‘Nixed: The Upside of Getting Dumped,’ which explores the concept of investing in stocks that have been removed from major indexes. He explains that these ‘dumped’ stocks often outperform the market and thinks investing in a strategy such as this provides an opportunity to invest in deep value, small-cap, and unloved companies. Meb and Rob touch on other topics, including the performance of value investing, the narrative around AI, and the macroeconomic backdrop.
Key Points
- The process of adding and removing stocks from index funds is not passive and can lead to significant valuation disparities.
- Stocks removed from indexes often outperform those added due to factors like mean reversion and lower valuation multiples.
- There are asymmetric risks in the current market environment, particularly regarding inflation and economic growth, which favor value and small-cap investments.
Follow Rob: Website
Resources: Research Affiliates' Interactive Asset Allocation Tool Nixed: The Upside of Getting Dumped Elections and the Stock Market: Polarization Trumps Politics The NVIDIA/AI Singularity: Breakthrough, Bubble, or Both Buy High and Sell Low with Index Funds! Wes Gray podcast episode on launching an ETF
Sponsor: Today's episode is sponsored by YCharts. YCharts enables financial advisors to make smarter investment decisions and better communicate with clients. Get 20% off your initial YCharts Professional subscription when you start your free trial
Chapters
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| 16:05 | |
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| 35:25 | |
| 45:25 |
Transcript
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