Better just short all legacy automotive and include Tesla in that group, but at that point you have to wonder about these economies more generally. Tesla is falling behind but the rest of these companies are barely even in the game. The idea that Laotians and Chileans will all have $10k self-driving BYD sedans to complement their $10k Unitree robot servants while "the west" drives Toyota Corollas with v6 engines and folds their own laundry out of the dryer ... doesn't make a lot of sense to me.

Theoretically, you could short TSLA in the same amount that you own it within the ETF. This would be functionally equivalent to owning a custom market cap ETF minus TSLA.

I would believe ... plan to buy the ETF, find the number of shares of Tesla integrated into your ETF purchase, and then buy the ETF and short-sell that number of shares of Tesla "simultaneously". Keep checking the composition of the ETF and rebalance your Tesla short, or perhaps also the ETF.

Without fractional shares it might be difficult to get an exact counterbalance, and there will be inconvenient short vs long term capital gains tracking for rebalancing events.

Edit: spelling

I wish this existed more generally, but it doesn't. However, you can do it in a few different ways:

(1) As another commenter noted, you can short TSLA in rough proportion to the amount of it in your ETF. This incurs some borrowing costs but you also get to park the money from the short, so it's not too bad overall.

(2) You could go for mid-cap funds like VO instead of total-market funds. But this does change your overall investment picture. I kind of like it as a way of reducing my tech exposure, but historically, the total market / s&p 500 funds have outperformed the mid-cap funds, so it's worth recognizing the risk here.

The shorting approach is pretty low risk given that it's counterbalanced by owning those shares indirectly through your ETF holdings.

Go long etf, short tesla weighted by etf weight. Relatively basic stuff. You can also go long TSLQ etf if you can't or don't want to short outright.

I had created a similar (but for AI) based request on r/bogleheads on reddit , because though it has its uses , it just feels too close to the web3 hype which I have equated so deeply in my mind with scam.

The response was generally to buy a etf which pays high dividends and since these tech companies don't pay high dividends , but that puts you away from a whole market.

On internet , it seems that most people mention tesla doesn't give dividend so you are safe with that option.

Shorting doesn't feel like it would work in the long run , I am not sure but it seems that you just don't want to take any (not profit nor lose) risk associated with tesla but shorting puts you at a you win if they lose kind of situation. I am not sure.

All you need to do is proportionally short out Tesla, and keep your portfolio up to date with the SP500 rebalancing to make sure you are aligned.

That said, it's probably not a good idea. Think of Index Flows as a container (the index tracking vehicles) with water inside that sloshes around to constituents.

Because there is essentially a mega-trend of migration to low fee Index tracking funds (on many levels, resulting from Global Capital flows being net positive for the U.S. and the intra-U.S. migration from active to passive as well as complexes like the 401k space), the underlying characteristic of market cap weighted funds propping up to Size factor is dominant (the inflows proportionally get directed to the largest constituents).

As shown with Tesla, it can seemingly look a bit arbitrary when it comes to which names float to the top. Take Tesla's case, where a perpetual short squeeze, constant expectation beats, high retail ownership, and extreme upside option activity vaulted the name to extremely high valuation. What most didn't expect, of course, was for Tesla to stay at a $1 trillion market cap. But you have to realize that flows into index funds are consistently positive, and even forces like option flows that were once a volatility enhancer and took liquidity can act like a volatility suppressor under more normal circumstances (depending on if Dealers are long or short gamma/convexity, and they are usually long). So you have a sort of typical case where a name vaults to a high valuation and then pins there, supported by flows, while the water now flows around this large entrenched name and moves around other illiquid names.

Of course this process isn't actually arbitrary, it's just esoteric, and it's a huge part of what trading is today, even compared to 5 years ago. In many ways, the tail wags the dog, so to speak, and when you're looking at something like Tesla's stock price, you're really looking at the derivative of the option positioning. If there is a large block of option open interest on a name, that's now included in all of the trader oriented reports of the name, and nobody is going to want to come in and take a position against these mean reverting flows, somewhat reinforcing that process.

Conversely, traditional active value evaluation is less dominant of a force in the markets than it used to be. Index funds buy big things, and they reinforce momentum factor as well. This is reflected in investor behavior on all levels, including the active fund management space, because you can't fight these forces or you will lose your accounts.

That's not to say that price discovery isn't happening. The saying that markets are voting mechanisms in this short term and weighing mechanisms in the long term still holds true. The short and even mid term movements are less of a random walk combined with animal spirits from sweaty men in trading pits, and is instead a sort of bizarre "gamma vortex" battlefield, and then the long term price moves are increasingly dominated by these distortions from market cap weighted domination. Price discovery works within this cadence, and often happens in short ferocious bursts and sector rotations.

So back to why it's not a good idea. I said that because of the interplay of forces above not because of Tesla's actual valuation or even Tesla's outlook. The moment you step against the index flows, you are taking a negative expected value position. I'm somewhat up to date on markets and am constantly exposed to them during the day, and I've personally lost 1mm on TSLA over the past decade because I refused to let the lessons above really get into my bones ("lost", as other trading positions with opposite exposure have netted out to more than compensate for that, but it's a good anecdote to share here).

In many respects, Tesla's valuation is fairly arbitrary and it represents a sort of token of the strange interplay of forces within the walls of index flows. Unless you specialize in that area, it's probably best to just let it play out. With TSLA in particular your short is very much stepping into an active trade where forces like options flows are running at extremely high heat. If you are buying the S&P 500, you want pure access to these positive megatrends. If you aren't comfortable with it, and I certainly don't blame you, then instead of shorting out Tesla against your index investments, Consider putting some money aside in investments that do not track the index and maybe do something more traditional like small cap value that is perpetually undervalued as a result of these very same index flows. It goes without saying, but these investments will not include Tesla either. I would strongly argue for taking this approach instead of meddling with SP500 weighting. Get your pure SP500 exposure (which is guaranteed to participate in future TSLAs/NVDAs/etc), and then pick something else pure that steps away from the somewhat arbitrary market cap weighting that dominates markets today. In return for stepping away from the crowd flows (which arguably comes at a cost) you are then rewarded in kind by mindfully taking advantage of the lack of interest in certain market factors (again, using SmallCap Value as an example, since there is a rich academic literature on many of these traditional factor areas, but there are many areas with sound academically supported areas which gain steam from stepping against the index forces, ex: part of my cash is permanently in volatility trading that harvests the volatility expansion and contraction cadence within which price discovery happens in modern markets).

If you are not in US but for example Europe or other areas where most of people lives in blocks, not houses, start buying car garages. The own place to charge your car will be luxury in such areas.

That just sounds like shorting TSLA with extra steps.

Isn’t he just 50 years old or so? Another 40 years of presidency ahead!