I've been thinking lately about the best way to 'opt out' of a large stock in an index and would like to hear your input.
The stock in question for me is Tesla. I did a quick portfolio review and based on our holdings of VTSAX and other indices, I estimate we are holding ~$8,000 of Tesla stock. I am just... not interested in having that level of exposure to Tesla. I won't pretend to know more about Tesla than the market, so just call it my personal speculative bet. I personally don't like holding so much of something where the value seems to be driven as much by memes and tweets as by fundamentals. Yes, everything in the stock market is driven by speculation, but this feels like an extreme case given its outsized position in my portfolio.
(Part of what got me thinking about this was the article from Matt Levine: https://www.bloomberg.com/news/newslett ... -500-index)
The only options I have come up with are:
- Sell short Tesla stock - normally the argument against this is that I would not be able to stay solvent as long as the market can stay irrational, but in this case I already have exposure to the upside of the asset; I am just negating that position. Main downside I see is the complexity of managing a short position that stays consistently aligned with my exposure from index funds.
- Build my own index by buying all the stocks separately - this seems like a HUGE and expensive hassle to avoid one stock, which is the the whole reason index funds are attractive in the first place.