Re:Stock Market: What Happens If Tesla Enters S&P 500
by ethbro on Saturday August 01, 2020 @02:06PM
(#24022589)
One of the commonly expressed intents for buying indices is lazy diversification. By having vastly unevenly-weighted indices, one fails to accomplish that aim.
Assuming diversification is the goal, your comment would only be true (that 1+1 and 2 are equivalent) if the constituent parts of hyper-scale companies operated independently. In reality, I'd say that rarely happens.
At best, you get something like Facebook (there can only be so many true chiefs). At worst, you get something like GE (cannibalizing viable businesses to feed others).
And all of this is to say nothing of that fact that, historically, Amazons don't become 2x Amazons with the frequencies that {mid-cap} become {large cap}, simply by virtue of total addressable market maximums in mature business areas.
Re:Stock Market: What Happens If Tesla Enters S&P 500
by zurfer on Saturday August 01, 2020 @02:04PM
(#24022576)
FOO is Salesforce.
BAR will be my future start-up. After the IPO I will make sure that Salesforce acquires all our shares and your example will become the ultimate example for finance or stock text books.
This doesn't seem that bad to me?
Imagine that you own FOO and BAR. They're each 1% of your holdings and each 1% of the US stock market. Now they merge. How much of your holdings should be the new company FOOBAR? Seems to me like it should be 2% now that FOOBAR is ~2% of the market.
AAPL, AMZN, GOOG, etc each represent a large number of products and businesses, and I don't see why you'd want to decrease your exposure just because they trade under a single stock symbol.