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A lot of people are just piled onto S&P 500 index funds, often because that's the only passive option offered by their 401(k) plan.

SketchySeaBeast 6y ago
In that case it's really just one index fund - the one that matches the S&P, and not index funds in general. I'm not sure why you use this as evidence of the S&P being an issue as they explicitly excluded that TSLA craziness.
- mumblemumble 6y ago
  We seem to be running afoul of the is-ought problem here. I'm not talking about how things ought to work. I'm inclined to agree with you on that front, but it's also not the concern I'm raising. I'm saying that this craziness strikes me as an indication that how things are actually working may not be how they ought to work. Or at least not how they ought to work according to the advice that's being given to countless retail investors.
  - SketchySeaBeast 6y ago
    But I'm still confused - the TSLA craziness is specifically excluded from index funds. If you had money in TSLA chances are you put it there yourself outside of an index fund and certainly not one that was S&P 500 focused (which is apparently the default choice).
    - mumblemumble 6y ago
      The big pop and big drop around the S&P 500 decision is not just TSLA craziness. It's also S&P 500 craziness - people were, I'm guessing, speculating on the expected effect that an S&P 500 listing would have on demand for TSLA shares. Or, to put it another way, I think we just saw another indication that the S&P 500 index is not immune to Goodhart's Law.
      - robjan 6y ago
        Think it's more that there are lots of less sophisticated investors in on TSLA. Inclusion in the SP500 does not usually send a stock to the moon because it's already priced in.
    - hartator 6y ago
      I think his point was TSLA should be included in the SP500 whatever index management think of this stock just based on numbers and not including it is kind of going against the market.

SketchySeaBeast 6y ago

In that case it's really just one index fund - the one that matches the S&P, and not index funds in general. I'm not sure why you use this as evidence of the S&P being an issue as they explicitly excluded that TSLA craziness.

mumblemumble 6y ago
We seem to be running afoul of the is-ought problem here. I'm not talking about how things ought to work. I'm inclined to agree with you on that front, but it's also not the concern I'm raising. I'm saying that this craziness strikes me as an indication that how things are actually working may not be how they ought to work. Or at least not how they ought to work according to the advice that's being given to countless retail investors.
- SketchySeaBeast 6y ago
  But I'm still confused - the TSLA craziness is specifically excluded from index funds. If you had money in TSLA chances are you put it there yourself outside of an index fund and certainly not one that was S&P 500 focused (which is apparently the default choice).
  - mumblemumble 6y ago
    The big pop and big drop around the S&P 500 decision is not just TSLA craziness. It's also S&P 500 craziness - people were, I'm guessing, speculating on the expected effect that an S&P 500 listing would have on demand for TSLA shares. Or, to put it another way, I think we just saw another indication that the S&P 500 index is not immune to Goodhart's Law.
    - robjan 6y ago
      Think it's more that there are lots of less sophisticated investors in on TSLA. Inclusion in the SP500 does not usually send a stock to the moon because it's already priced in.
  - hartator 6y ago
    I think his point was TSLA should be included in the SP500 whatever index management think of this stock just based on numbers and not including it is kind of going against the market.