Consequences on ETF's with Tesla joining S&P500 -

Investing / Portfolios
1

Big news! As all of you know by now, Tesla will be included into the S&P500 on December 21st (in one time). I feel this big change deserves a post on this forum so we may discuss the potential consequences for index trackers.

How large of a distortion do you think we may expect in ETF’s like VTI? The transactions on the 21st could be the largest in history, estimated 72 Billion USD

At Tesla’s current rate, passive funds are expected to have to sell 35B USD in assets to make a hole big enough for Tesla. How does this affect ETF shares?

The following mindset goes against the Mustachian’s, but would it any sense to simply sell everything, taking your profit / losses and purchasing again after the trackers have reset? (I’m assuming not, yet I’m quite inexperienced and only got as far as buying and holding for a >1 year…)

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None. It isn’t based on S&P500.

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3

VTI today already consists out of 0.88% in Tesla. see Vanguard Mutual Fund Profile | Vanguard

4

Yet Tesla is included in it’s holdings, does a large purchase of these shares not make any difference?

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The point is it does not need to be bought “more” in vti because it is already held in it at market size.

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6

If you think it makes a difference, there are way more lucrative ways to benefit from it than divesting/reinvesting from your index ETFs :slight_smile:

7

I guess you mean here VUSA?

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Tesla is at 0.5T market cap, that’s 2% the SP500. Nothing major will happen. Index funds will start including it on different dates. Some might add it already now, some later in January.

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For sure, the inclusion will increase the price of TESLA stock even more. But no impact on VTI
The S&P500 is tracked by $4590 billion, so 2% is 91.8 billion. Theoretically, it will increase the market cap by 91.8 billion (currently 539 billion). However, I don’t know how the effect will be seen on the total market cap or stock price

Source: http://investorfactbook.spglobal.com/sp-dow-jones-indices/sp-dow-jones-indices-worlds-leading-provider-of-financial-market-indices/

10

Investors know that this is going to happen, so it won’t increase the price.

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11

Yes and no, due offer and demand if fewer investors sell than the funds buy, the stock price will increase and increase the market cap

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Whatever you think should happen, is already priced in. Into TSLA price & into the price of other companies. Pretty sure ETFs will prepare for it in advance. It’s not like they will all run and buy TSLA on 21 December.