Eli5; space x forcing index funds to buy their stock..yah or nay?

[Gamisch]

I'm making some cash and right now its sitting passively. Safe, but stagnant obly increasing because I'm living stacking ,working hard and monitoringmy expenses

..and yet every time when I'm considering investing something comes up that makes me hesitant.

Now, recently I've heard that space x forces index funds to buy in despite being a losing company. Some say its gonna be a gaint rug pull

Can someone explain this like I'm a challenged 5 year old? Again, keep it simple please...rumors like this make me rather go the slow route and as they say in my native language " keep my money in my sock " instead of trusting it to something I honestly dont understand....and yet on the other hand the FOMO is also real..

Help a brother out!

 

[FlexpertHamilton]

You should have also prefaced this by saying "please don't comment if you have 'Elon Derangement Syndrome' too."

 

[Gamisch]

You should have also prefaced this by saying "please don't comment if you have 'Elon Derangement Syndrome' too."

???
Is that still a thing? Derangement syndromes?

Anyway, do you know how this works regarding the sp500 and IPOs?

 

[FlexpertHamilton]

???
Is that still a thing? Derangement syndromes?

Yes, in fact it's gotten even worse for the people who have them.

I actually would like to know this stuff too, but there's a good chance anyone who talks of this will be heavily biased.

 

[Gamisch]

Yes, in fact it's gotten even worse for the people who have them.

I actually would like to know this stuff too, but there's a good chance anyone who talks of this will be heavily biased.

Okay. I somewhat misunderstood the deranged part my bad. I was merely hoping that anyone with trading experience could explain it all in layman's terms.

Apart from how one feels about Elon Musk.I dont really care about his persona tbh. Because I dont wanna feck around with my hard earned money I wanna make well informed choices!!

On one hand it's all looks like a scam, on the other hand it looks like an opportunity...oh well I just keep my cash in my stacked in my pillow.

 

[viking22]

The basic mechanism is that if indexes are forced to include Space X (and the other mega IPOs in the pipeline such as Chat GPT and Anthropic) then they will have to sell some of all the other stocks in the index to rebalance the weights. This is not great if you take the view that the IPOs are massively overvalued and already major US market indices are very concentrated and top heavy and it will be the biggest tech stocks that are driving returns so it all amounts to a pretty massive bet on AI. Then again is AI something you want to bet against?

Good news is that so far it is only the NASDAQ which is including SpaceX. Most pension funds etc are invested in the broad market index ie S&P 500. So provided you stick to those you'll avoid the more speculative AI plays.

Generally when faced by uncertainty broad diversification is the most sensible approach i.e. reduce your US stock market exposure and move a decent chunk of money into foreign stocks, cash and a smaller chunk of money into things like gold, natural resource equities etc.