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Vanguard or Blackrock buying your stock doesn’t mean shit… Stop using it to confirm your bias.

Vanguard or Blackrock buying your stock doesn't mean shit... Stop using it to confirm your bias.

As the quarterly Institutional Reporting season comes to end, you have likely seen an abundance of posts and comments that are formatted like this: "{Insert major institutional investor here} bought shares of {ticker} so it MUST be good!!!"

Vanguard and Blackrock have 8 and 9 Trillion dollars in AUM respectively, them being invested in your company with 2*10-4% of their assets doesn't really mean much. They also have 13,756 and 14,996 reportable holdings respectively, your one stock really isn't that special when it comes to these two (and other massive institutions). Frankly, Vanguard and Blackrock NOT being invested in your stock should be a massive sign of concern.

In most cases most of the stocks held by Vanguard and Blackrock are just wrapped up into a nice mutual fund or ETF and given out to investors. The vast majority of the time you see vanguard or Blackrock buying or selling stock is due to them rebalancing their funds with set preset parameters. For example, here is how vanguard decides which stocks to buy for its largest ETF:

"The Total Stock Market Index Fund and Extended Market Index Fund use a sampling method of indexing, meaning that the Fund’s advisor, using computer programs, generally selects from the target index a representative sample of securities that will resemble the target index in terms of key risk factors and other characteristics." – link

Meaning, the reason Vanguard bought a fuck load of shares in your favorite stock could come down to a RANDOM sampling of an index…

This is financial advice

submitted by /u/kokanuttt
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