[javagram]

If you’re investing in S&P 500 don’t worry about it.

The whole point of passive investing in an index is that you don’t need to concern yourself with the individual index components.

Compare VV (Vanguard Large Cap ETF) with VOO (Vanguard S&P 500 ETF) and their performance is very correlated despite VV owning Tesla and VOO not.

Currently VV is slightly over-performing VOO but it might or might not reverse in the future.

[DavidSJ]

There are a lot of illusory ideas out there for beating the market. But I do believe there’s at least one way to do so without any special expertise, and that’s to studiously avoid being sucked into the frenzied, speculative bubbles that seem to reliably take hold of a significant fraction of the population.

In an efficient market, one might expect the smart, rational players to correct these bubbles. But once they’ve sold all their own holdings, you’re left with a Winner’s Curse [1] dynamic where the most (irrationally) optimistic investors are the ones ultimately setting the price. And essentially the only way the rational players can affect things from there is through short-selling, thereby risking running afoul of Keynes’ famous adage about the market remaining irrational for longer than they can remain solvent.

Thus there can fairly regularly arise situations in which somewhat common knowledge has it that some asset is overvalued, without the price of that asset collapsing. Until eventually it does.

It seems to me, then, that it’s not so foolish to attempt to get some of the diversification benefits of an index fund, while avoiding particular components whose valuations seem to defy rationality.

[1] https://en.wikipedia.org/wiki/Winner's_curse