SpaceX in your index fund, explained
When SpaceX joined the Nasdaq-100 index on 7 July 2026, following a rule change it had itself requested allowing large newly public firms to join after just 15 days of trading, index funds tracking the benchmark were forced to buy its shares. This raised questions about whether a single, highly valued and reportedly overpriced company entering a major index could threaten the stability of funds that millions of ordinary savers rely on for low-risk, long-term investing.
Index funds, popularised by economist Burton Malkiel's 1973 book "A Random Walk Down Wall Street" and endorsed by Warren Buffett, work by tracking a whole market rather than picking individual stocks, and passive investing overtook active fund management in assets under management in 2024. Malkiel, interviewed for the piece, said he would be wary of buying SpaceX shares individually given the roughly $1.77 trillion valuation, but argued its inclusion does not undermine the broader case for index investing. The piece notes that anticipation of forced index-fund buying may have contributed to unusual trading patterns around SpaceX's stock, including a dip just before its index inclusion, benefiting some banks and hedge funds.
- SpaceX joined the Nasdaq-100 on 7 July 2026 after a rule change it requested.
- Index funds had to buy in, raising fears about fund stability.
- Expert Burton Malkiel says index funds remain sound despite SpaceX's high valuation.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Critics of forced index inclusion argue that when a single, richly valued company can enter a major benchmark after just 15 days of trading – a threshold it lobbied to lower itself – passive funds are compelled to buy regardless of price discipline, concentrating risk in vehicles marketed as low-risk and diversified. They contend this exposes ordinary savers to the fortunes of one firm's valuation, allows sophisticated traders to anticipate and profit from predictable fund flows at retail investors' expense, and raises legitimate governance questions about a company shaping the very rules that determine its own market access.
The case against
Defenders of the current approach argue that index funds are designed to reflect the market as it is, not to make individual valuation judgements, and that this discipline – buying the whole market rather than trying to pick winners – is precisely why passive investing has delivered strong long-term results and overtaken active management. They note that any single stock's weighting in a broad index like the Nasdaq-100 is capped and modest relative to the whole, that inclusion rules are transparent and applied consistently rather than to one firm alone, and that short-term trading noise around index-entry dates does not undermine the soundness of buy-and-hold index investing over decades.