SpaceX in your index fund, explained

2026-07-20 · Source: The Verge · Field: Finance & Economics — Capital Markets & Investment Management, Personal Finance & Wealth Planning · Depth: Intermediate, medium

Summary

SpaceX, with a market capitalization exceeding \$1.5 trillion, was fast-tracked onto the Nasdaq-100 following a rule change requested by the company, allowing it to join the benchmark on its 15th day of trading. This inclusion has raised concerns among investors about the stability of index funds, particularly given SpaceX's perceived overvaluation and CEO Elon Musk's "novel and extreme governance structure," which limits shareholder influence and litigation rights. However, Burton Malkiel, a key figure in popularizing index funds, argues that SpaceX's inclusion is not a reason to avoid these investment vehicles. He emphasizes that index funds, which aim to match market benchmarks like the Nasdaq-100, inherently diversify risk, and historically, only a small minority of stocks (around 4%) are responsible for the market's overall 10% annual return. While index funds had to buy SpaceX shares, and future lockup releases could impact its price, Malkiel maintains that market concentration, including AI-heavy companies, has always existed and does not undermine the long-term strategy of broad market investment.

Key takeaway

For investors concerned about specific company inclusions like SpaceX or market concentration within index funds, remember that broad market diversification remains a robust long-term strategy. While individual stocks can be overhyped, index funds inherently absorb volatility and capture the gains from the few high-performing companies. If avoiding certain companies is a high priority, you might consider S&P 500 index funds over Nasdaq-100, or explore ESG funds, despite their potentially higher fees and lower returns.

Key insights

SpaceX's inclusion in index funds does not fundamentally alter the long-term benefits of diversified market investment.

Principles

• Most market returns come from a minority of stocks.
• Experts cannot reliably pick winning stocks.
• Market concentration is a historical constant.

In practice

• Consider S&P 500 index funds to avoid Nasdaq-100 specific issues.
• Explore ESG funds if avoiding specific companies like SpaceX is a priority.

Topics

• Index Funds
• SpaceX IPO
• Nasdaq-100
• Investment Strategy
• Corporate Governance
• ESG Investing

Best for: Investor, General Interest

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Editorial summary, takeaway, and curation by AIssential. Original article published by The Verge.