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Bear with me here, but this question came to me while talking about investing with someone who prefers to invest solely in real estate because "they actually own something". The price can go up and down and they still have some land. I get that, ultimately, the concreteness of land is less valuable than the real return of an asset, but we'll put that aside for this debate. My goal, when talking about passive investing to individuals like this, is to have a tool in my arsenal that says "actually, you own something more concrete than you think when investing in something like VOO".
Back to my story, I made the point that, when one owns stocks, they own a very real slice of a very real business, with very real voting rights. Just like the value of a property can go up and down, one still owns a very real piece of land and what is on it, with a stock, you still own a share.
I recognized the analogy isn't perfect. A single share does not always represent the same slice of a company. Things like new stock being issued and stock buybacks can affect how much of a company one truly owns. Real estate isn't risk free in this regard either, eminent domain has be used in such a way to strip wealth away from individuals without any fault of their own but I recognize its a greater issue in stock.
I started thinking more about it later, and came across the idea that, well, even if a single company is buying or creating more stock, surely across an entire market, things would be smoother. So, I start thinking about what ownership of one share of an index fund like VOO meant, concretely.
I know shares of VOO are not static and new shares are created or destroyed as a result VOO trading above or below its NAV. For easy math's sake, let's say 50 shares of VOO exist and those shares represent 50% of the market. In this world, 1 share of VOO represents a 1% slice of the S&P500. Let's say demand for VOO goes up, it's trading above its NAV, so an extra share is created and stock is bought to back it. Would the math shake out such that there are 51 shares representing 51% of the S&P500? Would this ratio hold steady over the long term? If it does change, is the ratio changing over days, months, years?
Some things that I recognize are confounders include that I believe there's a small amount of arbitrage involved in share creation and stock buying; that the S&P500 does not fully represent the economy (so you can't say you own a slice of the economy, just a slice of the S&P500) and that economic growth might favor small caps; and that, of course, there's obviously not such a small amount of shares of VOO and that with sufficiently large numbers, the math might shake out differently.
My ultimate instinct is that, while, yes, exactly what percentage of of the S&P500 you own when you own one share of VOO is likely to fluctuate, it's likely not on the order of doubling or halving, at least not on the horizon of a few years. If that's true, I believe it's not disingenuous to tell someone they own some relatively concrete share of the S&P500 when they buy a share of VOO.