Is Tesla being added to the S&P 500 concerning?

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doniboni
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Re: Is Tesla being added to the S&P 500 concerning?

Post by doniboni »

F150HD wrote: Mon Dec 14, 2020 6:05 pm
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:44 am Comparing Tesla to a auto manufacturer is similar to comparing Microsoft to a typewriter company in 1981.
Hmmm.....maybe you could contact Marketwatch as that is a comparison made in their article.

Image
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:41 am Tesla will gain market share from providing better cars at cheaper prices.
Will believe it when I see it. :beer
You are comparing market value in relative comparison which is truly pointless and meaningless.
If you a befuddled how Tesla can be the size of all those you should be comparing enterprise value.
And when you compare enterprise value Tesla is probably 1/10 of the value of the sum of those companies.
columbia
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Re: Is Tesla being added to the S&P 500 concerning?

Post by columbia »

To set the record straight on Tesla: it's not moving from any other midcap funds:

It is - and has been - in the Vanguard Large Cap fund.
harikaried
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Re: Is Tesla being added to the S&P 500 concerning?

Post by harikaried »

columbia wrote: Wed Dec 16, 2020 5:37 am To set the record straight on Tesla: it's not moving from any other midcap funds:
At least according to Morningstar Category in Fidelity's mutual fund search, these Mid-Cap Blend have Tesla:

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striker79
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Re: Is Tesla being added to the S&P 500 concerning?

Post by striker79 »

They should add bitcoin to the S&p500 too, the rise in value is similar to Tesla's
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burritoLover
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Re: Is Tesla being added to the S&P 500 concerning?

Post by burritoLover »

Don't own an index of 500 large cap US companies and then cry when a company get added when it meets the index requirements. Sure, the S&P committee is kind of active manage-y with discretion on what to add, but they couldn't ignore Tesla forever. And, sorry, you and no one else knows what the future of Tesla holds nor whether or not it is overvalued as if that was some kind of given fact. There will always be winners and losers in every index and if this possibility is too much for you, perhaps you should be more diversified across small/mid caps and other countries.
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F150HD
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Re: Is Tesla being added to the S&P 500 concerning?

Post by F150HD »

doniboni wrote: Wed Dec 16, 2020 3:27 am
F150HD wrote: Mon Dec 14, 2020 6:05 pm
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:44 am Comparing Tesla to a auto manufacturer is similar to comparing Microsoft to a typewriter company in 1981.
Hmmm.....maybe you could contact Marketwatch as that is a comparison made in their article.

Image
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:41 am Tesla will gain market share from providing better cars at cheaper prices.
Will believe it when I see it. :beer
You are comparing market value in relative comparison which is truly pointless and meaningless.
If you a befuddled how Tesla can be the size of all those you should be comparing enterprise value.
And when you compare enterprise value Tesla is probably 1/10 of the value of the sum of those companies.
none of us wrote the article so you should contact Marketwatch with your opinion.
Northern Flicker
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Re: Is Tesla being added to the S&P 500 concerning?

Post by Northern Flicker »

columbia wrote: Wed Dec 16, 2020 5:37 am To set the record straight on Tesla: it's not moving from any other midcap funds:

It is - and has been - in the Vanguard Large Cap fund.
It will be moving out of funds like VXF the extended market index fund or any S&P Midcap 400 fund.
tenkuky
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Re: Is Tesla being added to the S&P 500 concerning?

Post by tenkuky »

Northern Flicker wrote: Thu Dec 17, 2020 12:00 am
columbia wrote: Wed Dec 16, 2020 5:37 am To set the record straight on Tesla: it's not moving from any other midcap funds:

It is - and has been - in the Vanguard Large Cap fund.
It will be moving out of funds like VXF the extended market index fund or any S&P Midcap 400 fund.
I hold Schwab S&P 500 and VXF in my taxable. I have no intention to trade these (legacy holdings that I'm waiting to TLH into VTI some day).
Otherwise I have no exposure to this "event", all other in Total Mkt funds/ETFs.

Is there anything I need to be watchful for if I'm a passive observer today?
Northern Flicker
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Re: Is Tesla being added to the S&P 500 concerning?

Post by Northern Flicker »

Not really. Splitting VTI this way generally is fine. The main downside, and it is a very small one, is that you will be paying your share of the transaction cost associated with stocks moving between the funds, but the ETF structure ahould enable Vanguard to manage the capital gains. I guess the ER of holding the portfolio as VTI is also slightly lower. These are not very significant issues.
ohboy!
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Re: Is Tesla being added to the S&P 500 concerning?

Post by ohboy! »

F150HD wrote: Mon Dec 14, 2020 6:05 pm
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:44 am Comparing Tesla to a auto manufacturer is similar to comparing Microsoft to a typewriter company in 1981.
Hmmm.....maybe you could contact Marketwatch as that is a comparison made in their article.

Image
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:41 am Tesla will gain market share from providing better cars at cheaper prices.
Will believe it when I see it. :beer
I read that they have been losing significant EV market share in Europe to the competition selling cheaper cars.
ohboy!
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Re: Is Tesla being added to the S&P 500 concerning?

Post by ohboy! »

striker79 wrote: Wed Dec 16, 2020 1:57 pm They should add bitcoin to the S&p500 too, the rise in value is similar to Tesla's
I think there is likely more leverage in TSLA. And it’s worth almost 50% more by mkt cap.

Robinhood has turned stonks into a casino.

I think volatility will increase in general and a further decoupling from fundamentals. Media will continue to try to attribute markets to headlines but I don’t believe most of it.

What will be good for s&p numbers is to print more money and keep interest rates low. The rest seems irrelevant at this point.
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TomatoTomahto
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Re: Is Tesla being added to the S&P 500 concerning?

Post by TomatoTomahto »

burritoLover wrote: Wed Dec 16, 2020 2:24 pm Don't own an index of 500 large cap US companies and then cry when a company get added when it meets the index requirements. Sure, the S&P committee is kind of active manage-y with discretion on what to add, but they couldn't ignore Tesla forever. And, sorry, you and no one else knows what the future of Tesla holds nor whether or not it is overvalued as if that was some kind of given fact. There will always be winners and losers in every index and if this possibility is too much for you, perhaps you should be more diversified across small/mid caps and other countries.
This. Except for some employee retirement accounts that have restricted choice, I have never understood why so many choose, voluntarily, to have such dramatically UN-diversified holdings as S&P 500.
I get the FI part but not the RE part of FIRE.
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F150HD
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Re: Is Tesla being added to the S&P 500 concerning?

Post by F150HD »

Tesla Stock Just Cost Average Investors $7.4 Billion

...index funds just spent $90 billion buying Tesla shares -- and in just two short days, they've already lost $7.4 billion for their fund shareholders

:|
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

F150HD wrote: Thu Dec 24, 2020 1:10 am Tesla Stock Just Cost Average Investors $7.4 Billion

...index funds just spent $90 billion buying Tesla shares -- and in just two short days, they've already lost $7.4 billion for their fund shareholders

:|
I don't have high hopes for Tesla, but I certainly wouldn't measure stock performance by the results of a couple days.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

TomatoTomahto wrote: Sun Dec 20, 2020 5:59 am...I have never understood why so many choose, voluntarily, to have such dramatically UN-diversified holdings as S&P 500.
I can't tell if you're being sarcastic, but that's a pretty ridiculous statement so I'm thinking it was intended that way?
The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
absolute zero
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Re: Is Tesla being added to the S&P 500 concerning?

Post by absolute zero »

JoMoney wrote: Thu Dec 24, 2020 5:52 am The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
You have it backwards. Small caps (in this case the extended market) have historically provided higher average returns than the S&P500 and have added diversification benefits compared to an S&P500 only portfolio.
absolute zero
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Re: Is Tesla being added to the S&P 500 concerning?

Post by absolute zero »

JoMoney wrote: Thu Dec 24, 2020 5:40 am
F150HD wrote: Thu Dec 24, 2020 1:10 am Tesla Stock Just Cost Average Investors $7.4 Billion

...index funds just spent $90 billion buying Tesla shares -- and in just two short days, they've already lost $7.4 billion for their fund shareholders

:|
I don't have high hopes for Tesla, but I certainly wouldn't measure stock performance by the results of a couple days.
Yeah I agree - discussing the performance of Tesla (or any stock) over a period of two days is pretty much a waste of breath.
Triple digit golfer
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Re: Is Tesla being added to the S&P 500 concerning?

Post by Triple digit golfer »

absolute zero wrote: Thu Dec 24, 2020 6:11 am
JoMoney wrote: Thu Dec 24, 2020 5:52 am The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
You have it backwards. Small caps (in this case the extended market) have historically provided higher average returns than the S&P500 and have added diversification benefits compared to an S&P500 only portfolio.
Sure, but over time it really hasn't made any material difference. I suspect in another 20 years it will look similar, with hardly any discernible difference between the lines. So, will Tesla being added, regardless of performance, really make a significant difference? I doubt it.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

absolute zero wrote: Thu Dec 24, 2020 6:11 am
JoMoney wrote: Thu Dec 24, 2020 5:52 am The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
You have it backwards. Small caps (in this case the extended market) have historically provided higher average returns than the S&P500 and have added diversification benefits compared to an S&P500 only portfolio.
No.
Over the life of Vanguard's Extended Market / Completion Index fund (VEXMX), when added to the S&P 500 fund (VFINX) to complete 'Total Market' weighting, despite having a slightly higher return over this specific period (10.9% CAGR compared to 10.8% CAGR for S&P 500 alone) it had higher standard deviation and a lower 'risk adjusted' return. An investor would have been better off leveraging up VFINX 2% then owning the completion index.
PV Link

Even using longer periods of time for a completion index before there were funds available tracking it, the performance wasn't any better
Wilshire 4500 Completion Index

The better point though, is it really hasn't made much difference.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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TomatoTomahto
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Re: Is Tesla being added to the S&P 500 concerning?

Post by TomatoTomahto »

JoMoney wrote: Thu Dec 24, 2020 5:52 am
TomatoTomahto wrote: Sun Dec 20, 2020 5:59 am...I have never understood why so many choose, voluntarily, to have such dramatically UN-diversified holdings as S&P 500.
I can't tell if you're being sarcastic, but that's a pretty ridiculous statement so I'm thinking it was intended that way?
The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
Entire stock market? There are other countries with markets, and of course there are many companies that are not in any stock market. But, to the topic of this thread, Tesla has been in TSM for some time, so TSM holders have benefitted (?) from its wild ride.

I don’t want to derail this thread into international or not, so let’s leave that topic. But no, I wasn’t being sarcastic.
I get the FI part but not the RE part of FIRE.
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

TomatoTomahto wrote: Thu Dec 24, 2020 6:41 am...Tesla has been in TSM for some time, so TSM holders have benefitted (?) from its wild ride...
Andy they still own it now, so they're on the same ride S&P 500 investors are on.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Valueinvestor2
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Re: Is Tesla being added to the S&P 500 concerning?

Post by Valueinvestor2 »

ChrisO wrote: Mon Dec 07, 2020 11:46 am Hello, as many of you already know Tesla's stock is overvalued. Even if it has positive net income in the coming years the price you are playing now for its future returns is too high. A lot of people are front loading the price before it's going to be added to the S&P 500. The other issue is that is has such a large market cap right now if it was added it will make up a large percentage of the index fund. We all know that over the long term a stock is based on the companies' profitability. If Tesla's stock keeps getting traded so high it could lead to big stock price drops in the future.

I also have a lot of friends that are talking about trading stocks and using apps like Robinhood now and stock option trading is very popular now. I know you aren't suppose to time the market but it's starting to feel like the euphoria of the late 1990's all over again (not quite as bad but still). Is the only thing we can do is keep holding the S&P 500 (cheapest fund I have in my 401k) and ride out the storm?
I believe Tesla is going to $0 eventually. It’s run by a sociopath. I look at it like 1.7% of monies invested in the s and p are now worth $0. But there are all kinds of companies in SPY that will be worth $0 in 10-20 years so it may not be fair to single out Tesla. That’s what you get when you index a basket of winners and losers and you have to accept that.
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

Valueinvestor2 wrote: Thu Dec 24, 2020 7:01 am
ChrisO wrote: Mon Dec 07, 2020 11:46 am Hello, as many of you already know Tesla's stock is overvalued. Even if it has positive net income in the coming years the price you are playing now for its future returns is too high. A lot of people are front loading the price before it's going to be added to the S&P 500. The other issue is that is has such a large market cap right now if it was added it will make up a large percentage of the index fund. We all know that over the long term a stock is based on the companies' profitability. If Tesla's stock keeps getting traded so high it could lead to big stock price drops in the future.

I also have a lot of friends that are talking about trading stocks and using apps like Robinhood now and stock option trading is very popular now. I know you aren't suppose to time the market but it's starting to feel like the euphoria of the late 1990's all over again (not quite as bad but still). Is the only thing we can do is keep holding the S&P 500 (cheapest fund I have in my 401k) and ride out the storm?
I believe Tesla is going to $0 eventually. It’s run by a sociopath. I look at it like 1.7% of monies invested in the s and p are now worth $0. But there are all kinds of companies in SPY that will be worth $0 in 10-20 years so it may not be fair to single out Tesla. That’s what you get when you index a basket of winners and losers and you have to accept that.
In some sense, everything is headed to zero in the end.
In the mean time, Tesla has lots of free entropy and it's potential could be all over the place. But it is hard for me to imagine it being more valuable then it is now. I would bet that the risk of Tesla's future not justifying it's current price is much higher than the probability that it will. But I don't want to get into the position of making those kinds of bets, so I'm with you in that regard... it is what it is, and it will be what it will be :wink:
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
an_asker
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Re: Is Tesla being added to the S&P 500 concerning?

Post by an_asker »

JoMoney wrote: Thu Dec 24, 2020 6:32 am
absolute zero wrote: Thu Dec 24, 2020 6:11 am
JoMoney wrote: Thu Dec 24, 2020 5:52 am The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
You have it backwards. Small caps (in this case the extended market) have historically provided higher average returns than the S&P500 and have added diversification benefits compared to an S&P500 only portfolio.
No.
Over the life of Vanguard's Extended Market / Completion Index fund (VEXMX), when added to the S&P 500 fund (VFINX) to complete 'Total Market' weighting, despite having a slightly higher return over this specific period (10.9% CAGR compared to 10.8% CAGR for S&P 500 alone) it had higher standard deviation and a lower 'risk adjusted' return. An investor would have been better off leveraging up VFINX 2% then (emphasis mine) owning the completion index.
PV Link
[...]
English is a funny language. All it takes is ONE letter to swing the meaning of an entire sentence. Question: do you mean "than" or "then"? Sounds like you meant "than" but want to confirm!
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

an_asker wrote: Thu Dec 24, 2020 7:34 am
JoMoney wrote: Thu Dec 24, 2020 6:32 am
absolute zero wrote: Thu Dec 24, 2020 6:11 am
JoMoney wrote: Thu Dec 24, 2020 5:52 am The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
You have it backwards. Small caps (in this case the extended market) have historically provided higher average returns than the S&P500 and have added diversification benefits compared to an S&P500 only portfolio.
No.
Over the life of Vanguard's Extended Market / Completion Index fund (VEXMX), when added to the S&P 500 fund (VFINX) to complete 'Total Market' weighting, despite having a slightly higher return over this specific period (10.9% CAGR compared to 10.8% CAGR for S&P 500 alone) it had higher standard deviation and a lower 'risk adjusted' return. An investor would have been better off leveraging up VFINX 2% then (emphasis mine) owning the completion index.
PV Link
[...]
English is a funny language. All it takes is ONE letter to swing the meaning of an entire sentence. Question: do you mean "than" or "then"? Sounds like you meant "than" but want to confirm!
Yes. My fingers often type different words that sound the same in my head, even when I know the difference. "There", "their", "they're" and "your" "you're " are also reoccurring problem words.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
an_asker
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Re: Is Tesla being added to the S&P 500 concerning?

Post by an_asker »

JoMoney wrote: Thu Dec 24, 2020 7:43 am
an_asker wrote: Thu Dec 24, 2020 7:34 am
JoMoney wrote: Thu Dec 24, 2020 6:32 am
absolute zero wrote: Thu Dec 24, 2020 6:11 am
JoMoney wrote: Thu Dec 24, 2020 5:52 am The S&P 500 pretty much is the entire stock market less about 20% that's objectively more risky and really hasn't added to the return, or "diversification" in the sense of some uncorrelated benefit of the portfolio.
You have it backwards. Small caps (in this case the extended market) have historically provided higher average returns than the S&P500 and have added diversification benefits compared to an S&P500 only portfolio.
No.
Over the life of Vanguard's Extended Market / Completion Index fund (VEXMX), when added to the S&P 500 fund (VFINX) to complete 'Total Market' weighting, despite having a slightly higher return over this specific period (10.9% CAGR compared to 10.8% CAGR for S&P 500 alone) it had higher standard deviation and a lower 'risk adjusted' return. An investor would have been better off leveraging up VFINX 2% then (emphasis mine) owning the completion index.
PV Link
[...]
English is a funny language. All it takes is ONE letter to swing the meaning of an entire sentence. Question: do you mean "than" or "then"? Sounds like you meant "than" but want to confirm!
Yes. My fingers often type different words that sound the same in my head, even when I know the difference. "There", "their", "they're" and "your" "you're " are also reoccurring problem words.
Haha! Thanks for the clarification. I'm guilty of doing the same on occasion! :oops:
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

JoMoney wrote: Thu Dec 24, 2020 6:32 am...
Over the life of Vanguard's Extended Market / Completion Index fund (VEXMX), when added to the S&P 500 fund (VFINX) to complete 'Total Market' weighting, despite having a slightly higher return over this specific period (10.9% CAGR compared to 10.8% CAGR for S&P 500 alone) it had higher standard deviation and a lower 'risk adjusted' return. An investor would have been better off leveraging up VFINX 2% then owning the completion index.
PV Link...
Looking at this example again, on top of mis-use of the then/than
Perhaps a better example than using leverage to make the point
A 91% VFINX (Vanguard S&P 500) / 9% VFISX (Vanguard Short Term Treasuries) had lower standard deviation and higher returns than
A 90% VTSMX (Vanguard Total Stock Market / 10% VFISX
PV Link

But again, the difference is so small as to be negligible. There are , were , and will-be time periods where the results are different... but the small-cap and ex-500 parts of the market are pretty consistently more volatile and objectively more risky than the 500.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Triple digit golfer
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Re: Is Tesla being added to the S&P 500 concerning?

Post by Triple digit golfer »

JoMoney wrote: Thu Dec 24, 2020 7:59 am
JoMoney wrote: Thu Dec 24, 2020 6:32 am...
Over the life of Vanguard's Extended Market / Completion Index fund (VEXMX), when added to the S&P 500 fund (VFINX) to complete 'Total Market' weighting, despite having a slightly higher return over this specific period (10.9% CAGR compared to 10.8% CAGR for S&P 500 alone) it had higher standard deviation and a lower 'risk adjusted' return. An investor would have been better off leveraging up VFINX 2% then owning the completion index.
PV Link...
Looking at this example again, on top of mis-use of the then/than
Perhaps a better example than using leverage to make the point
A 91% VFINX (Vanguard S&P 500) / 9% VFISX (Vanguard Short Term Treasuries) had lower standard deviation and higher returns than
A 90% VTSMX (Vanguard Total Stock Market / 10% VFISX
PV Link

But again, the difference is so small as to be negligible. There are , were , and will-be time periods where the results are different... but the small-cap and ex-500 parts of the market are pretty consistently more volatile and objectively more risky than the 500.
Makes me feel fine using the 500 index as 80% (401k and taxable account) of my U.S. equity holdings with Total Stock Market the other 20% (IRAs).

Each pay period I have money going into the S&P, but to balance I need to reduce total stock in my IRA and increase international. So, the 500 index as a percentage of my U.S. equities keeps growing and total market keeps shrinking. I have considered adding small caps or extended market, but I really don't think it's worth even the minimum complexity.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by dru808 »

JoMoney wrote: Thu Dec 24, 2020 6:55 am
TomatoTomahto wrote: Thu Dec 24, 2020 6:41 am...Tesla has been in TSM for some time, so TSM holders have benefitted (?) from its wild ride...
Andy they still own it now, so they're on the same ride S&P 500 investors are on.
That’s what I’m thinking. on the ride up, how much did Tesla add to tsms’ return, 1 bp annually?
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JoMoney
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

dru808 wrote: Thu Dec 24, 2020 2:00 pm
JoMoney wrote: Thu Dec 24, 2020 6:55 am
TomatoTomahto wrote: Thu Dec 24, 2020 6:41 am...Tesla has been in TSM for some time, so TSM holders have benefitted (?) from its wild ride...
Andy they still own it now, so they're on the same ride S&P 500 investors are on.
That’s what I’m thinking. on the ride up, how much did Tesla add to tsms’ return, 1 bp annually?
Tesla went IPO 10 years ago, looking at the 10 year returns between VFIAX (Vanguard 500) and VTSAX (Vanguard Total Stock)
$10,000 on 12/24/2010 to 12/23/2020
VFIAX $35,960.73
VTSAX $35,960.50

(-0.000064% annualized)
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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gwe67
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Re: Is Tesla being added to the S&P 500 concerning?

Post by gwe67 »

ohboy! wrote: Sun Dec 20, 2020 1:06 am
F150HD wrote: Mon Dec 14, 2020 6:05 pm
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:44 am Comparing Tesla to a auto manufacturer is similar to comparing Microsoft to a typewriter company in 1981.
Hmmm.....maybe you could contact Marketwatch as that is a comparison made in their article.

Image
MinnGuyInvesting wrote: Mon Dec 14, 2020 10:41 am Tesla will gain market share from providing better cars at cheaper prices.
Will believe it when I see it. :beer
I read that they have been losing significant EV market share in Europe to the competition selling cheaper cars.
Tesla's market cap is now over $700 billion, which is more than all of these combined:

Volkswagen
General Motors
BMW
Volvo
Honda
Ford
Ferrari
Hyundai
Kia
Nissan
Suzuki
Subaru
Isuzu
Mazda

I don't get it, but I can only hope that any plunge TSLA might take does minimal damage to my portfolio.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by 4nursebee »

JoMoney wrote: Thu Dec 24, 2020 7:16 am
Valueinvestor2 wrote: Thu Dec 24, 2020 7:01 am
ChrisO wrote: Mon Dec 07, 2020 11:46 am Hello, as many of you already know Tesla's stock is overvalued. Even if it has positive net income in the coming years the price you are playing now for its future returns is too high. A lot of people are front loading the price before it's going to be added to the S&P 500. The other issue is that is has such a large market cap right now if it was added it will make up a large percentage of the index fund. We all know that over the long term a stock is based on the companies' profitability. If Tesla's stock keeps getting traded so high it could lead to big stock price drops in the future.

I also have a lot of friends that are talking about trading stocks and using apps like Robinhood now and stock option trading is very popular now. I know you aren't suppose to time the market but it's starting to feel like the euphoria of the late 1990's all over again (not quite as bad but still). Is the only thing we can do is keep holding the S&P 500 (cheapest fund I have in my 401k) and ride out the storm?
I believe Tesla is going to $0 eventually. It’s run by a sociopath. I look at it like 1.7% of monies invested in the s and p are now worth $0. But there are all kinds of companies in SPY that will be worth $0 in 10-20 years so it may not be fair to single out Tesla. That’s what you get when you index a basket of winners and losers and you have to accept that.
In some sense, everything is headed to zero in the end.
In the mean time, Tesla has lots of free entropy and it's potential could be all over the place. But it is hard for me to imagine it being more valuable then it is now. I would bet that the risk of Tesla's future not justifying it's current price is much higher than the probability that it will. But I don't want to get into the position of making those kinds of bets, so I'm with you in that regard... it is what it is, and it will be what it will be :wink:
Can you clarify your use of the phrase free entropy? I've read briefly on it in wikipedia and it does not make sense to me.

I keyed in on the word entropy as I thought it a good word to use in a business name (one of my businesses). My basic understanding of the word entropy is that the world tends to disorder absent an input of effort or work, this state of disorder is entropy. My business is basically the result of my work fighting entropy, organizing energy into production and usefulness. If I die the business will likely fall into disorder or a higher state of entropy.

I have additionally thought of Musk's efforts and work similarly with relation to entropy, albeit on a much different plane.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by nisiprius »

gwe67 wrote: Tue Aug 03, 2021 5:39 pmI don't get it, but I can only hope that any plunge TSLA might take does minimal damage to my portfolio.
If you are using a Total Stock Market index fund or an S&P 500 index fund, you can do more than hope.

As of 6/30/2021, Tesla was 1.166% of Total Stock and it hasn't changed much since then. Here are the ten largest holdings in VTI plus a few other stocks of interest (Ford, GM, Gamestop, and AMC).

Image

1) If you held the Total Stock Market Index Fund, you bought Tesla in 2010 and you weren't taken in by any shrewd traders capitalizing on indexers being forced to buy it on December 21st, 2020 when it was added to the S&P.

2) If Tesla were to go to zero overnight, the Total Stock Market Index Fund would lose 1.166% of its value. The fund goes up and down by that much a dozen times a year. Certainly, a loss is a loss whether you can see it or not. But it if happened, you probably couldn't spot it by looking at a price chart, it would be lost in the noise.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by Orangutan »

nisiprius wrote: Wed Aug 04, 2021 8:31 am
gwe67 wrote: Tue Aug 03, 2021 5:39 pmI don't get it, but I can only hope that any plunge TSLA might take does minimal damage to my portfolio.
If you are using a Total Stock Market index fund or an S&P 500 index fund, you can do more than hope.

As of 6/30/2021, Tesla was 1.166% of Total Stock and it hasn't changed much since then. Here are the ten largest holdings in VTI plus a few other stocks of interest (Ford, GM, Gamestop, and AMC).

Image

1) If you held the Total Stock Market Index Fund, you bought Tesla in 2010 and you weren't taken in by any shrewd traders capitalizing on indexers being forced to buy it on December 21st, 2020 when it was added to the S&P.

2) If Tesla were to go to zero overnight, the Total Stock Market Index Fund would lose 1.166% of its value. The fund goes up and down by that much a dozen times a year. Certainly, a loss is a loss whether you can see it or not. But it if happened, you probably couldn't spot it by looking at a price chart, it would be lost in the noise.
I agree. This is all a non-issue. Perhaps Tesla is overvalued, I don't know. I do know it isn't of the slightest concern to me.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by JoMoney »

4nursebee wrote: Wed Aug 04, 2021 5:38 am
JoMoney wrote: Thu Dec 24, 2020 7:16 am
Valueinvestor2 wrote: Thu Dec 24, 2020 7:01 am
ChrisO wrote: Mon Dec 07, 2020 11:46 am Hello, as many of you already know Tesla's stock is overvalued. Even if it has positive net income in the coming years the price you are playing now for its future returns is too high. A lot of people are front loading the price before it's going to be added to the S&P 500. The other issue is that is has such a large market cap right now if it was added it will make up a large percentage of the index fund. We all know that over the long term a stock is based on the companies' profitability. If Tesla's stock keeps getting traded so high it could lead to big stock price drops in the future.

I also have a lot of friends that are talking about trading stocks and using apps like Robinhood now and stock option trading is very popular now. I know you aren't suppose to time the market but it's starting to feel like the euphoria of the late 1990's all over again (not quite as bad but still). Is the only thing we can do is keep holding the S&P 500 (cheapest fund I have in my 401k) and ride out the storm?
I believe Tesla is going to $0 eventually. It’s run by a sociopath. I look at it like 1.7% of monies invested in the s and p are now worth $0. But there are all kinds of companies in SPY that will be worth $0 in 10-20 years so it may not be fair to single out Tesla. That’s what you get when you index a basket of winners and losers and you have to accept that.
In some sense, everything is headed to zero in the end.
In the mean time, Tesla has lots of free entropy and it's potential could be all over the place. But it is hard for me to imagine it being more valuable then it is now. I would bet that the risk of Tesla's future not justifying it's current price is much higher than the probability that it will. But I don't want to get into the position of making those kinds of bets, so I'm with you in that regard... it is what it is, and it will be what it will be :wink:
Can you clarify your use of the phrase free entropy? I've read briefly on it in wikipedia and it does not make sense to me.

I keyed in on the word entropy as I thought it a good word to use in a business name (one of my businesses). My basic understanding of the word entropy is that the world tends to disorder absent an input of effort or work, this state of disorder is entropy. My business is basically the result of my work fighting entropy, organizing energy into production and usefulness. If I die the business will likely fall into disorder or a higher state of entropy.

I have additionally thought of Musk's efforts and work similarly with relation to entropy, albeit on a much different plane.
I can't say for certain what I was thinking when I wrote that, likely anchored around something else I was reading or listening to at the time, but that was 8+ months ago.
I was probably thinking something along the lines of information entropy, and if each $1 of value the company held had some future potential of moving to something like either $2 or $0, then Tesla's future state, while more chaotic, has a much broader range of future potential states before going to "absolute zero" (or being worth $0).

I also might have been trying to make some allusion to "free" money being pumped into the stock as "free entropy".

... that said, each $1 of the companies value doesn't move independently, so even in some analogy to information entropy, whatever the future state is, it could likely be compressed with fewer bits used to convey the same thing more efficiently.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by BogleFan510 »

ChrisO wrote: Mon Dec 07, 2020 11:46 am Hello, as many of you already know Tesla's stock is overvalued. ...
Claiming a publicly traded stock is definitively 'overvalued' erodes your credibility as a poster, because approximately half of people trading it want to buy the stock at this price, so not only do they dissagree, but they believe it is under valued versus its future price.

So no, I am not worried. I am reasonably confident in market efficiency for equities pricing and most research supports this.

Regarding the above post, most companies that fail, even if shareholders receive zero payoff, end up contributing assets, talent and IP back into the general ecosystem of companies, which often creates value and future growth in the index. I know of several examples, including a pretty deep knowledge of where various Enron, Kodak, Worldcom, etc. assets ended up, and how they added later earnings to other companies, being acquired at fire sale discounts, so to speak.

So even less need to worry if you own the whole market, or at least a majority of the public bits of it. One company winning means another loses. What is more worrying than the possibility that Tessla fails are major economic disruptions that negatively impact the overal global economy, destroying value, like wars, famine, disease, etc. Overpriced equities tend to funnel money into the economy in a positive way, even if generating sub par ROE for late investors.
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Re: Is Tesla being added to the S&P 500 concerning?

Post by gwe67 »

Looking at the chart, you would expect that most of the cars on the road would be Teslas. Reality is that Tesla produced less than two percent of the cars sold in the U.S. in 2020. This is little more than lowly Mazda, despite Tesla's market cap being more than 120 times greater than Mazda. Toyota sold the most cars in the U.S. in 2020, which was more than six times more cars than Tesla.

Market cap divided by U.S. sales in 2020:

Tesla $2.3 million
Mazda $20,000

Sure looks like a house of cards.

source:
https://www.goodcarbadcar.net/2020-us-v ... -by-brand/
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Re: Is Tesla being added to the S&P 500 concerning?

Post by nisiprius »

It is possible to believe that buying Tesla stock is, at the very least, a crapshoot, and to believe, at the same time, that the addition of Tesla to the S&P 500 is not concerning.

I believe both.

As to Tesla, all corporations, of whatever size, have the possibility of fairly sudden and fairly complete collapse, and I agree that there is a disconnect between Tesla's current business and the capitalization of its stock. The market is presumably, it must be, looking well ahead to an electric-car future with Tesla as the #1 car company.

But there's no certainty that the early leaders and first movers will win. To mention three offhand, BlackBerry (Research In Motion) once looked like a sure thing to dominate the future of business smartphones. I don't think that in the early 1980s anybody could have believed that Lotus Development Corporation and the Lotus 1-2-3 spreadsheet would not be permanent fixtures. America Online was ubiquitous. None them were tiny startups at the time they folded; they were all big corporations.

The problem is that anyone who isn't an oldster hardly knows these names does not appreciate "how it was;" just how substantial, solid, and permanent they looked.
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