Why do we need hedge funds and traders?
3 by bordemje | 3 comments on Hacker News.
Hi. My question is related to the stock market. Warren Buffett argues that active investing doesn't make sense because it loses out to passive investing in the long run. I agree with this. I also agree that there are profitable strategies based on arbitrage, but this requires ultra-fast computer bots. (I assume that this is the main strategy of James Simons). This strategy requires very serious competence, so it also does not make sense for an ordinary investor. But the question arises: why do hedge funds and traders exist if active investing does not make sense? What is their meaning, if it is much more profitable for any player to deposit money in SPY (S&P500)? Is this some kind of big scam, or am I missing something? Or the top hedge funds just manipulate the market for profit?