Afaik this is the first time that an IPO is big that it immediately gets a significant share of a broad market index fund. The rules among the providers are actually quite diverse, so it's complicated. The Rational Reminder podcast discussed it in April: https://rationalreminder.ca/podcast/406

Their conclusion: It might be bad, but so be it. No need to change strategy.

if you want to personally manage your risk you can by taking a small short position or buying long dated puts.

It being in the public markets is something you can deal with if you want.

It being in private markets means you cannot choose to participate in the upside if you want.

The episode was excellent

Definitely not all. Look into 401(k) self-directed brokerage accounts.

If your plan uses Fidelity you can move your 401k into Brokeragelink and that lets you pick individual stocks. Schwab, TIAA, Alight and some others also have something similar.

Good thing is that index funds don't hold stocks at market capitalization but only at free float value. So a company whose shares are mostly held by founders, employees, and strategic investors gets a weight well below its headline valuation.

Most don’t. The one that is the center of much of the controversy around these IPOs, NASDAQ-100, doesn’t use float adjustments.

A lot of people have been using it to passively invest in AI (via QQQ).

It’s nonsensical for a variety of reasons but we live an era of the stock market just being another casino…

I believe it's the opposite :) All major indices (S&P500, MSCI, FTSE...) use free-float adjustments. And recently also NASDAQ - they've changed to cap of 3x the value of free-floating shares.

You are correct. That’s what I intended to say but I see that worded that comment unclearly.