SpaceX in your index fund, explained

Index funds are touted as one of the safest ways to invest. Rather than picking and choosing individual stocks, index funds let you bet on the market as a whole. So what happens when a company like SpaceX — a giant gamble, and, in my opinion, terribly overpriced — is fast-tracked into the Nasdaq-100? Does it suddenly threaten the stability of index funds based on the Nasdaq-100? Can a $1.77 trillion IPO crater the retirement funds of regular people who would ordinarily have no interest in investing in Elon Musk’s meme stock? The answer has less to do with SpaceX and more to do with index funds — how they work, their history, and why they’ve been treated as one of the least risky ways to interact with the stock market. So I talked to Burton Malkiel, one of the people most responsible for the rise of the index fund. “If I were buying individual stocks, I would think twice about buying SpaceX, which is tremendously overhyped,” he tells me. But SpaceX isn’t a reason to avoid index funds, he says. To explain why, here’s a dive into index funds, how SpaceX…