Comment by energy123
8 hours ago
You protect yourself by understanding that this is one infinitesimally small cost (expressed as a fraction of your portfolio returns) that doesn't overcome the benefits of maximum diversification and the ultra-low fees of broad-based ETFs.
Buy MSCI World, enjoy the 0.04% p.a. fees and minimal idiosyncratic risk, and relax.
Index rebalance traders will reduce your annual returns by less (probably much less) than 0.1%, but there is no better alternative for you at this moment in time.
I broadly agree. Though I'm less pessimistic: lots of people will pay lots of attention to SpaceX and friends, and with short selling in public markets being possible, an accurate price will be established very quickly.
Remember also: index funds are some of the participants most keen to lend out their shares to short sellers. It's one of the rare ways they can boost returns above the raw index they follow.
> and with short selling in public markets being possible, an accurate price will be established very quickly.
I know very little about markets, but: aren't the short-sellers just going to provide liquidity for the big index funds? Like, if the funds HAVE to buy SpaceX, and the funds are enormous, wont every single stock sold short be immediately gobbled up, as well as pretty much anyone else wanting to sell? Even if everyone else is selling like mad, it wont affect price much at all?
Maybe this is naive, but if these enormous funds are more or less forced to buy SpaceX, it seems impossible that "actual price discovery" is going to happen in any reasonable amount of time, and the short-sellers will be screwed.