3 ms·

Please, don’t buy the stock. It’s a classic retail investor trap

by baxtr 4mo ago

helsinkiandrew 4mo ago
The issue is that once it's in the S&P500, Russel, Nasdaq100 etc indices - everyone with a pension or tracker fund will be buying it without thinking
- tossandthrow 4mo ago
  Yes. I am severely reducing my exposure to these indices finding alternatives. My impressions is that US investors also have a special love for the S&P500 and could likely benefit from a non-US bias.
  - mapt 4mo ago
    The new thing lately is ETFs that are "Whole-Market minus Microsoft" or "Whole-Market Minus Magnificent Seven". You can achieve similar ends by combining a whole market fund with direct short positions if you're an institutional investor, but it gets a little needy of your attention and your calculator and your fees to maintain those positions as a low-cap retail investor (just buy a put a day or something?).
- throwfaraway4 4mo ago
  This is why direct indexing is important. I can simply exclude these tickers. Will it skew it slightly from the index? Sure but I’m ok with that
  - deleted 4mo ago
    [deleted]
- bpt3 4mo ago
  I am explicitly avoiding these indices until this exploit is fixed. The lack of diversity in SPY and the like is already bad enough without these pump and dump schemes being added to the mix. Buy alternative ETFs with similar performance and low fees. VIG is one example.
  - iso1631 4mo ago
    Not great when every other share price collapses as they get sold as funds are rebalanced. Almost every stock in VIG is in the S&P.
    - bpt3 4mo ago
      The "almost" portion of your statement is the entire point, and re-balancing isn't going to cause "every other share price to collapse".
      - ffsm8 4mo ago
        From your statement it seems like you're underestimating it's impact. Their impact would be felt across the whole market by their sheer valuation - even if you tried to exclude them specifically. So yeah, if eg ai crashed and took Nvidia, meta, goog or MS for the ride... You'd have massive impacts all across the board, even if you specifically tried to exclude them from your index, just because of how gigantic it's share on the economy is. But this is purely theoretical. It can only be considered an opinion until something actually happens - because the market has never been in a situation like this before - no matter what some people may claim.
        iso1631 4mo ago
        Not just that. If you have a $10B fund which owns things evenly across the nasdaq, and a new company arrives, you have to buy shares in the new company, which means selling existing shares or getting more funding to balance. So you buy $1B of SpaceX stock at the IPO price, meaning you have to sell 10% or $1B of existing Nasdaq stock, which (when combined with every other fund) lowers the cost of the other stocks. If I own stock in everything-but-spacex, then I'm seeing the price collapse because everyone else is selling. Then if spacex stock collapses to half its initial price, your $1B becomes worth $500m, you get margin called, and you have to sell more stock, pushing the other stocks down, and the problem cascades
        4mo ago

Please, don’t buy the stock. It’s a classic retail investor trap

by baxtr 4mo ago

Please, don’t buy the stock. It’s a classic retail investor trap

The issue is that once it's in the S&P500, Russel, Nasdaq100 etc indices - everyone with a pension or tracker fund will be buying it without thinking

tossandthrow 4mo ago
Yes. I am severely reducing my exposure to these indices finding alternatives. My impressions is that US investors also have a special love for the S&P500 and could likely benefit from a non-US bias.
- mapt 4mo ago
  The new thing lately is ETFs that are "Whole-Market minus Microsoft" or "Whole-Market Minus Magnificent Seven". You can achieve similar ends by combining a whole market fund with direct short positions if you're an institutional investor, but it gets a little needy of your attention and your calculator and your fees to maintain those positions as a low-cap retail investor (just buy a put a day or something?).
throwfaraway4 4mo ago
This is why direct indexing is important. I can simply exclude these tickers. Will it skew it slightly from the index? Sure but I’m ok with that
- deleted 4mo ago
  [deleted]
bpt3 4mo ago
I am explicitly avoiding these indices until this exploit is fixed. The lack of diversity in SPY and the like is already bad enough without these pump and dump schemes being added to the mix. Buy alternative ETFs with similar performance and low fees. VIG is one example.
- iso1631 4mo ago
  Not great when every other share price collapses as they get sold as funds are rebalanced. Almost every stock in VIG is in the S&P.
  - bpt3 4mo ago
    The "almost" portion of your statement is the entire point, and re-balancing isn't going to cause "every other share price to collapse".
    - ffsm8 4mo ago
      From your statement it seems like you're underestimating it's impact. Their impact would be felt across the whole market by their sheer valuation - even if you tried to exclude them specifically. So yeah, if eg ai crashed and took Nvidia, meta, goog or MS for the ride... You'd have massive impacts all across the board, even if you specifically tried to exclude them from your index, just because of how gigantic it's share on the economy is. But this is purely theoretical. It can only be considered an opinion until something actually happens - because the market has never been in a situation like this before - no matter what some people may claim.
      - iso1631 4mo ago
        Not just that. If you have a $10B fund which owns things evenly across the nasdaq, and a new company arrives, you have to buy shares in the new company, which means selling existing shares or getting more funding to balance. So you buy $1B of SpaceX stock at the IPO price, meaning you have to sell 10% or $1B of existing Nasdaq stock, which (when combined with every other fund) lowers the cost of the other stocks. If I own stock in everything-but-spacex, then I'm seeing the price collapse because everyone else is selling. Then if spacex stock collapses to half its initial price, your $1B becomes worth $500m, you get margin called, and you have to sell more stock, pushing the other stocks down, and the problem cascades
        4mo ago