Comment by tankenmate
15 hours ago
"Because the index needs accuracy.", and I would argue that include price accuracy not just inclusion accuracy. The S&P is a benchmark that is designed to reflect a subset of the market, and giving only some companies early access to the benchmark changes the benchmark. So if you want a benchmark that's designed to include all the big stocks regardless of age, profitability, etc then go make a new benchmark. The only thing you need to do is convince others to use your benchmark.
"go make a new benchmark" completely ignores how this works in practice. Benchmarks are only useful because everyone uses the same one, you can't swap it out. The S&P 500 benchmark is used as a comparison for trillions of dollars of mutual funds, index funds, and institutional mandates. The further the S&P 500 strays from reflecting the actual market, the more useless it becomes.
Also the S&P criteria have been revised multiple times, it's not some sacred unchangeable document.
> The further the S&P 500 strays from reflecting the actual market, the more useless it becomes.
Here I once again agree with you in part, and disagree in part.
The S&P 500 should reflect the actual market. That is, the actual market of publicly-traded companies with legal requirements for transparent accounting and reasonable expectations of future positive cash flows.
As you wrote yourself (https://news.ycombinator.com/item?id=48408363), "These [mega-cap IPO] companies will likely never meet S&P profitability inclusion criteria for the next 5 years."
At this point in time, I don't think it's reasonable to expect future positive cash flows from SpaceX or Anthropic. There are indeed some reasons to suspect that there won't be future positive cash flows from them.
You want to turn S&P 500 to a total market index. Why? That was never its purpose.
No? Where did I say that?
The purpose of the S&P 500 is to be the "best single gauge of U.S. large-cap equities". That's direct from their website. I never dispute this.
I dispute the fact they claim to be the best benchmark of large-cap U.S. equities, yet have rules that (currently) exclude large-cap equities like SpaceX, OpenAI, or Anthropic.
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