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Comment by martinald | Hacker News Reader

Let's get it in perspective though. The S&P500 market cap is currently $70T.

Assume that Anthropic, OpenAI and SpaceX all IPO and get included in SPY with the new fast listing rules. They are likely to be worth $3-4T combined, which means 'retail' investors are going to have perhaps 5% of their portfolio in it.

_Arugably_ that's a pretty fair allocation for retail investors to have to these "moonshot" style companies.

Also - if any one of these IPOs don't go well; I suspect the other(s) will have to postpone, further reducing exposure.

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Who invests in an index fund for "moonshots"?

Everyone I know who invests in an index fund is doing so to mitigate the risks of things like "moonshots" which are typically much riskier investments.

> Who invests in an index fund for "moonshots"?

> Everyone I know who invests in an index fund is doing so to mitigate the risks of things like "moonshots" which are typically much riskier investments.

The whole point of an index fund is to capture the growth of the whole market. If you wanted low risk you'd be buying bonds.

Is it? I thought the idea was diversity of risk, not "mitigating risk". You clearly don't want 100% of your 401k in OpenAI or Anthropic. But you probably do want 1 or 2% of it in, to give you the long term growth potential?

Regardless SPY is actually a pretty "risky" index fund on some measures - it pays a (very) low dividend compared to many other intl/ETF funds and is weighted very heavily towards tech stocks (atm).

If you genuinely wanted to mitigate risk you would probably not choose SPY.

> Is it?

Given that they've had to change the rules of index funds to allow for this, yes, this is not what people expect.

But the US has never had $1T+ IPOs before. And also a huge amount of enormous private companies that don't want to go public for various reasons.

Also, the rules have changed before. It's not the first time these rules have changed.

I see both sides of the argument (it's definitely _not_ good for 401k investors if Anthropic/OpenAI/SpaceX make huge leaps in technology that allow for far higher earnings that they aren't able to access, for example).

But my main point is that these investors regardless would "only" have 5% exposure to these. That surely cannot be considered a systemic risk that the OP is inferring.

That's justifying this because we've had rampant runaway inflation...

There's nothing special about the number $1T.

> which means 'retail' investors are going to have perhaps 5% of their portfolio in it

If I'm not reading it wrong though NASDAQ introduced a 3x multiplier for low-float stocks like SpaceX is most likely going to be (and maybe OpenAI and Anthropic too if they see that it works). A 15% exposure is then going to be pretty big.

Don't think so - the 3x is a separate cap. It actually reduces it down from market cap.

Eg say spaceX has $50bn of float at $1.5T valuation. If there wasn't _any_ cap at all, the full $1.5T would be used as the market cap. With the (new) 3x cap, it means only $150bn of the $1.5T valuation is taken into account in the index weighting.

Before this change, SpaceX wouldn't clear the 10% requirement to be listed in QQQ at all. So the 3x basically allows them to be included but _does not_ increase their market cap from $1.5T to $4.5T.

Btw, for clarity, I'm not saying there isn't questionable behaviour going on here. My main point is that even if SpaceX, openai and anthropic all went to 0 (unlikely IMO), it's not going to have a material impact on people's retirements which is what OP was proposing.

> 'retail' investors are going to have perhaps 5% of their portfolio in it.

If they are the only moonshot style companies in their portfolio, and if they crater that's the physical equivalent of a 160lb person carrying a gallon of milk around with them wherever they go. At least until they've drunk it I guess.

Lots of "ifs" in that sentence now I read it back though.

The index don’t use the full market cap, they use free float. Except for nasdaq and the Dow which just pick numbers out of the air.

At least at first the spacex free float will be quite modest.

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