[fsckboy]

>S&P 500 rejects SpaceX, also blocking entry for OpenAI and Anthropic

S&P 500 rejects MPT when it decides not to issue a waiver from its ordinary rules which require at least a year long track record, a rule that is clearly a throwback to slower days when companies would invariably grow their way to be among the largest 500, and not IPO at that size. This old fashioned view throws a monkey wrench into the universally recommended, least-risk MPT/CAPM investment strategy of diversification because investors will need to individually buy these individual stocks to balance their ETF portfolios to reduce their overall risk, and then sell these stocks when they get added to the indices, incurring capital gains taxes that they wouldn't otherwise pay.

[im3w1l]

You raise an interesting point. What about the rules change regarding the free float made for SpaceX? That was something I considered a bigger problem than the express listings, and for me the express listings kinda got tainted by association with that.

[fsckboy]

There is economic inefficiency in many aspects of real world markets, so while a perfect world might be better, we don't have access to that. The problem with "restricted" float is that all the demand for investment (in that company, in that sector) cannot be met except by price inflation. But the market will respond by setting a market price for the investment and a market weight for that investment, and we must assume that includes skepticism and risk of dilution factored in, and from that point MPT says you want that weight in your portfolio, even though there might hypothetically be more desireable scenarios that are not available.

(now, large growing companies need public investment in order to grow, so it might be said that there is some value to regulations as a cudgel, "no access to public capital markets if you don't open yourselves up more," but again, we can still rely on market pricing once decisions like that are made)

NVIDIA is something like 8% of the S&P 500, and these companies are projected to be higher: you can't ignore sectors like that if you believe in diversification to squelch unrewarded risk

[im3w1l]

If you try to buy more shares than are available, then price will go to infinity which is clearly disastrous. That's in theory. But maybe it wasn't that bad in this particular situation?