Author Topic: The effect of Tesla being added to the S&P 500. Our Index funds...  (Read 9779 times)

3toesloth

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #100 on: January 04, 2021, 10:54:24 AM »
Why does everyone get so emotional here, I thought this was an investing forum?
The fire thing is a fact all cars are capable of bursting into flames and I never said otherwise. Making car doors incapable of opening when said fire starts is what I was saying is a bad idea.
I have a Ram 1500 tradesman and a motorcycle. The Ram was cheapest smallest most simple pickup available at the time and probably still is. I said least amount of computerization not no computers. I'm an engineer I know it's impossible and unwise to rely on outdated tech when new is cheaper and more reliable. I also know it is equally unwise to use state of the art largely untested tech for systems where life and limb are on the line.

To get back to the S&P. My thesis is that by any measure the S&P is very overvalued, 2x or so. When Tesla inevitably falls back to something approaching normal it will either be part of a larger overall market correction or it will cause the correction. We have an entire generation that has yet to be invested during a major downturn (early 2020 doesn't really count). The fact that the S&P 500 committee wavered on adding Tesla may indicate that they are essentially acting as active managers, which should give passive investors some concern. What other active decisions are they making that we don't know about?
I'm sticking to bond funds as much as possible for the next few years with a very little VTSAX added. Give me my low but average reliable returns over huge swings any day. After all that is why people buy passive funds to begin with (and the low fees).

mistymoney

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #101 on: January 04, 2021, 11:43:36 AM »
Tesla (up ~5%) doing its best to prop up the S&P 500 (down over 1%). I expect those worried about TSLA's inclusion to be selling out of your index funds today and waiting to buy back once Tesla collapses?

:P

ColoradoTribe

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #102 on: January 04, 2021, 12:46:58 PM »
Why does everyone get so emotional here, I thought this was an investing forum?
The fire thing is a fact all cars are capable of bursting into flames and I never said otherwise. Making car doors incapable of opening when said fire starts is what I was saying is a bad idea.
I have a Ram 1500 tradesman and a motorcycle. The Ram was cheapest smallest most simple pickup available at the time and probably still is. I said least amount of computerization not no computers. I'm an engineer I know it's impossible and unwise to rely on outdated tech when new is cheaper and more reliable. I also know it is equally unwise to use state of the art largely untested tech for systems where life and limb are on the line.

To get back to the S&P. My thesis is that by any measure the S&P is very overvalued, 2x or so. When Tesla inevitably falls back to something approaching normal it will either be part of a larger overall market correction or it will cause the correction. We have an entire generation that has yet to be invested during a major downturn (early 2020 doesn't really count). The fact that the S&P 500 committee wavered on adding Tesla may indicate that they are essentially acting as active managers, which should give passive investors some concern. What other active decisions are they making that we don't know about?
I'm sticking to bond funds as much as possible for the next few years with a very little VTSAX added. Give me my low but average reliable returns over huge swings any day. After all that is why people buy passive funds to begin with (and the low fees).

3Toe, what line of work are you in? Are you by any chance an engineer? : )

The S&P used their discretion to override their own inclusion criteria and did not include Tesla once they achieved 4 profitable qtrs. That’s is their right, but their decision was a poor one and one that caused S&P fund investors to miss out on a chunk of Tesla gains. People have been telling me Tesla will “inevitably” fall since I bought my first shares at $165 in 2013. In pre-split dollars, those shares are now worth ~$3,700. No emotion from me, unless you’re counting happiness and gratitude. Sorry if my discussion tone is a bit defensive, but I’ve been debunking these same nonsense arguments for literally years. Seriously though, all the best in your investments. There is no one way to skin a cat. Before Tesla I’d never bought more than a few shares of any individual company, and my work and personal interests aligned to provide an early and fuller understanding of Tesla's business and potential. One that Wall Street was slow to understand. Outside TSLA, I’m nearly 100% VTI, so I’m not a gambler or one of those millennials you suggest are naive.

ColoradoTribe

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #103 on: January 04, 2021, 12:51:56 PM »
Truthfully, S&P committee should’ve used their discretion to add Tesla sooner, rather than later IMO. They could have justified based on market cap and profits being plugged back into growing the company. I understand their reluctance, but they chose poorly.

FIPurpose

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #104 on: January 04, 2021, 12:58:15 PM »
Truthfully, S&P committee should’ve used their discretion to add Tesla sooner, rather than later IMO. They could have justified based on market cap and profits being plugged back into growing the company. I understand their reluctance, but they chose poorly.

We all should have known what we were getting into when investing in something called "Standard and Poor"

PDXTabs

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #105 on: January 04, 2021, 01:03:18 PM »
The S&P used their discretion to override their own inclusion criteria and did not include Tesla once they achieved 4 profitable qtrs.

That's the problem: four profitable quarters shouldn't IMHO be a requirement. What if Amazon was still choosing to run unprofitable?

mistymoney

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #106 on: January 04, 2021, 01:05:38 PM »
Very interesting insight for me! I had no idea that inclusion in sp500 could be denied/postponed if they didn't want you in there.

I thought it was just the 500 biggest. Didn't even know about the profit part...

dandarc

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #107 on: January 04, 2021, 01:33:07 PM »
Very interesting insight for me! I had no idea that inclusion in sp500 could be denied/postponed if they didn't want you in there.

I thought it was just the 500 biggest. Didn't even know about the profit part...
They're not even super serious about the "500" part.

3toesloth

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Re: The effect of Tesla being added to the S&P 500. Our Index funds...
« Reply #108 on: January 04, 2021, 02:33:30 PM »
Truthfully, S&P committee should’ve used their discretion to add Tesla sooner, rather than later IMO. They could have justified based on market cap and profits being plugged back into growing the company. I understand their reluctance, but they chose poorly.
This is my problem with the S&P when they start choosing who and when to include a stock then the S&P funds are no longer passive. They should set their rules and follow them exactly anything less and there is too much room for shenanigans. Also since they are a benchmark they shouldn't be chasing returns anyway. It will lead to problems around adding high value companies like Yahoo, Amazon, Tesla..., but that is unavoidable. Whether their choice ends up being good or poor will be determined in time, but my main point is that they shouldn't be choosing at all.
Congrats on the gains.