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by sigmoid10 18 days ago
This disregards the fundamental reason why people buy index funds in the first place. Rules for consistent GAAP profitability and cooldown periods specifically prevent retail investors from being exposed to particular malicious stock market tactics and overall risks that otherwise could significantly hurt them in the short term. So it's more like saying "you don't like extra risk? too bad."
1 comments
gitfan86 18 days ago
Yes, if someone thinks that the top 500 companies include too much risk then yes too bad, you need to move out of SPY.

It isn't called the S&P495 because they kick out 5 of the biggest companies that some people consider to be risky.

I personally think its super risky to want to be Diversified and NOT include any exposure to SpaceX. Yes, Elon is unique but that doesn't mean his companies are going to fail especially given the potential risk of AI changing the world. Is IBM going to keep selling overpriced IT outsourcing in 5 years?

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sigmoid10 17 days ago
It's not about the overall long term risk of the company, it's the inherent short term risk of the IPO that will potentially hurt retail investors. Why not have them trade for a while and go to business as usual so things settle down and the index can prevent wild fluctuations? The only ones who might benefit from this rule change are pump-and-dump types.
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gitfan86 17 days ago
The goal of SP500 is to provide exposure to the 500 biggest companies, not protect shareholders. I think IBM might do poorly when AI destroys their overpriced IT outsourcing business, but that doesn't mean SP500 should kick them out.
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sigmoid10 16 days ago
Again, that's not the issue here. Long-term, these things should absolutely go into the index if they fulfill the size requirement. It's the IPO process that has people worried (and rightly so).
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siren2026 17 days ago
You are talking nonsense.

The reason why I liked the SP500 is especially BECAUSE they had guardrails against unprofitable speculative companies that just got added on the stock market. On average those stocks are going down on their first public year. The SP500 made sure to have a cooldown period before adding them.

Now you are trying to justify why we should have them anyways, even though I never chose that to start with.

The issue everyone is having is the rule changes to add them in a couple trading days. How can you defend that?

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gitfan86 17 days ago
You misunderstood what you were buying if you thought that S&P500 could never change their processes.
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