That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic).
The top comment and most of its subthreads are run-of-the-mill alarmism.
Most assets don’t follow those funds. And NASDAQ 100 is explicitly tech focused, I support them making the change.
The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500.
The market wasn’t pricing in any rebalancing. Commenters were screaming bloody murder about it. In the middle, I’m sure some numpties generated trading and management fees by switching target funds.
It seems to me like there's a fair amount to be concerned about, I wouldn't consider myself an expert on finance by any means so if you have some explanation of why it's not that bad I'd love to hear it.
Two other indices changed their rules to allow these companies specifically. Pensions and retirement funds rely on these indices to have continual, stable growth. Often the people whose money is being invested don't even have control over its allocation into these funds.
Coupled with the precarious state of the economy due to all the money already flowing through AI, changing the rules to throw retirement fund money into brand new extremely highly valued stocks with P/E ratios in the hundreds seems like a recipe for disaster. It reminds me of subprime mortgages.
> Two other indices changed their rules to allow these companies specifically
One of which is the NASDAQ 100, marketed for decades as a tech-focused index.
> Pensions and retirement funds rely on these indices to have continual, stable growth
Pensions build their own benchmarks. About 10 to 20% of retirement assets follow these indices directly for a variety of purposes. The S&P 500 aims for continuous large-cap growth, but that isn’t true for most indices, which seek to replicate something random.
> changing the rules to throw retirement fund money into brand new extremely highly valued stocks with P/E ratios in the hundreds seems like a recipe for disaster
The NASDAQ 100 has seen practically no net outflows due to this decision. And most retirement assets don’t blindly follow any index, let alone any single one. I opposed the rule changes at S&P. But the catastrophising was made for clicks and views. Not to inform anyone.
Like, anyone who actually acted on that brouhaha changed out of an index that isn’t going include SpaceX, incurring transaction fees and potentially tax hits (for non-retirement accounts) in the process, and probably cycling into a higher-fee fund.
I mean S&P had actually drawn up a lot of the changes, regulations, and paperwork for entrants, so it wasn't a done deal, but they absolutely were considering it, and it was a very real "risk".
> What was the common misconception?
That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic).
The top comment and most of its subthreads are run-of-the-mill alarmism.
> The top comment and most of its subthreads are run-of-the-mill alarmism.
Worth considering:
* https://en.wikipedia.org/wiki/Prevention_paradox
And the rules for the NASDAQ 100 were changed, as were MSCI and CRSP:
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
Most assets don’t follow those funds. And NASDAQ 100 is explicitly tech focused, I support them making the change.
The doomsaying was around most retirement assets. Which don’t follow any single index. But to the extent they do, follow the S&P 500.
The market wasn’t pricing in any rebalancing. Commenters were screaming bloody murder about it. In the middle, I’m sure some numpties generated trading and management fees by switching target funds.
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It seems to me like there's a fair amount to be concerned about, I wouldn't consider myself an expert on finance by any means so if you have some explanation of why it's not that bad I'd love to hear it.
Two other indices changed their rules to allow these companies specifically. Pensions and retirement funds rely on these indices to have continual, stable growth. Often the people whose money is being invested don't even have control over its allocation into these funds.
Coupled with the precarious state of the economy due to all the money already flowing through AI, changing the rules to throw retirement fund money into brand new extremely highly valued stocks with P/E ratios in the hundreds seems like a recipe for disaster. It reminds me of subprime mortgages.
> Two other indices changed their rules to allow these companies specifically
One of which is the NASDAQ 100, marketed for decades as a tech-focused index.
> Pensions and retirement funds rely on these indices to have continual, stable growth
Pensions build their own benchmarks. About 10 to 20% of retirement assets follow these indices directly for a variety of purposes. The S&P 500 aims for continuous large-cap growth, but that isn’t true for most indices, which seek to replicate something random.
> changing the rules to throw retirement fund money into brand new extremely highly valued stocks with P/E ratios in the hundreds seems like a recipe for disaster
The NASDAQ 100 has seen practically no net outflows due to this decision. And most retirement assets don’t blindly follow any index, let alone any single one. I opposed the rule changes at S&P. But the catastrophising was made for clicks and views. Not to inform anyone.
Like, anyone who actually acted on that brouhaha changed out of an index that isn’t going include SpaceX, incurring transaction fees and potentially tax hits (for non-retirement accounts) in the process, and probably cycling into a higher-fee fund.
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I mean S&P had actually drawn up a lot of the changes, regulations, and paperwork for entrants, so it wasn't a done deal, but they absolutely were considering it, and it was a very real "risk".
>> What was the common misconception?
> That the rule change was a done deal.
What are you talking about? The rule has already been changed in the NASDAQ. That makes it a done deal.
Anything changed can always be undone, but to be clear it has already happened. That makes it a done deal.
The S&P change was taken as a done deal. Search that page for S&P. The indices that flipped are less relevant than many individual active managers.