[markisus]

I’m trying to understand the mechanics here. I get that SpaceX and Nasdaq are in cahoots to get SpaceX bundled with a bunch of other stocks (and that bundle is called QQQ?)

But why must retail investors hold this bundle? If I’m holding now, I can sell it and buy a different bundle right? And if I’m not holding it now, I can just continue not to buy it after SpaceX gets included.

[nighthawk454]

There's trillions of dollars sitting in indexes that are quite literally 'passively' invested. Virtually everything holds this bundle in one way or another. Passive indexing has both outperformed and overtaken active investing - leading a lot of money into VOO/VTI/QQQ/etc that track the S&P500 or some other index ("the market"). For retirement funds like 401ks, retail contributes money every paycheck that gets routed into these indexes. There may not even be much of a choice - your 'plan' may only let you pick some kind of "Target Date Fund" and then the institution picks what it goes into, usually indexes.

If you fully actively managed your own money and picked mostly individual stocks (not broad indexes) then yeah you could change your allocations. But there's a lot of money already in.

[markisus]

QQQ is problematic because it’s influenced by strange back room dealings with Space X, if the article is to be believed.

VTI is different. It literally tracks all public stocks, weighted by market cap so no such manipulation is possible.

If a bunch of people will be forced to buy Space X (QQQ holders), active investors will short the stock in anticipation of market correction and money will flow from those who were forced to buy. I’m sure there are other ways to take advantage of a forced buyer situation.

Total market will be unaffected, assuming efficient market hypothesis / no arbitrage.

[nighthawk454]

QQQ is not in isolation. It’s just a bundle of stocks. Rebalancing that will affect the prices of its constituent stocks, which include some of the highest market cap stocks. Those same stocks are also in many of those other popular market-cap weighted indexes (VTI, VOO, SPY, etc). Price action originating from Nasdaq 100 rebalancing would affect everywhere else those stocks are held. Which is a lot of places.

Except those other indexes won’t have SpaceX. Suggesting any index price moves would be … asymmetric at best.

Now it’s being reported that they’re angling to get SpaceX in the S&P 500 index as well [1]. Maybe if all the indexes get it then it balances out everywhere, who knows. This whole event would be in beyond unprecedented territory.

[1] https://finance.yahoo.com/news/p-weighs-rule-changes-speed-1...

[markisus]

Can you explain what asymmetric means?

Are you saying that this forced rebalancing will be large enough to cause a large price drop on other stocks?

Let’s just think about any stock in particular, eg stock ABC. If I am an active investor, I have an opinion on ABC and its net present value. When ABC dips below that value, I buy. Wouldn’t I prepare some cash in anticipation of this large ABC sell off at discounted prices? And thus the ABC price would not move from its fair price.

[bagacrap]

Bingo. No sane investor holds QQQ because there is no academic theory behind why it should exist. Why is a stock better if it's listed on NASDAQ instead of NYSE? Can any investor answer this question? Doubt it. If you are into factor investing and you like large cap growth, you buy something like VUG. Most people should just stick with SP500 or total market.

However, QQQ had a really good last 15 years and lots of investors hold it because they are chasing returns and because the marketing worked. (The managers of QQQ are legally obligated to spend X% of the fees collected on advertising the ETF, ha ha ha.)

[maest]

> No sane investor holds QQQ

There's more than $1T tracking Nasdaq 100, so that's an ignorant statement.

[throwaway2037]

Yeah, I had a milk-up-the-nose moment when I read that Brandolini's Law atomic bomb. I swear when anything finance appears as a topic on HN, the amount of bullshit/misinformation far exceeds the good stuff.

[blitzar]

> Why is a stock better if it's listed on NASDAQ instead of NYSE?

The NASDAQ is a stock exchange based in the United States. It’s made up of around 3,500 companies, with a heavy weighting towards companies in the information technology sector.

> If you are into factor investing and you like large cap growth

If you are into factor investing and like large cap tech, you buy something like QQQ.

> No sane investor holds QQQ

The insane can take comfort in their 20% CAGR for the last 10 years on a massive large cap tech expansion.

[iSnow]

Yes, you can sell and buy a different index. However, those who buy ETFs want broad market exposure without picking stocks (or ETFs). Also selling and re-buying means you have to pay taxes now - depending on jurisdiction, that is way worse than holding till you are retired and then selling.

SpaceX/Nasdaq want to distort the rules to make more money off the backs of those passive investors.

[markisus]

If you sell and then rebuy isn’t that considered a wash trade and therefore exempt from taxes?

[MPSimmons]

If you are a financial brokerage and you want to offer the S&P 100 or the NASDAQ 100, you can't just do that. You have to license that - https://www.spglobal.com/spdji/en/custom-indices/solutions/

I imagine, though I don't know, that the requirement to use the index name and contents also dictates allocation.

[nieve]

https://en.wikipedia.org/wiki/Index_fund