I do agree that the optics of this aren’t great, and it’s rather easy to be cynical about motives.
I'm trying to help my parents now their at retirement age and am seeing first hand what not planning for your future looks like. They hit retirement with nothing but a small social security check every month. Not even enough to cover rent in most places.
I don't know how much you have in your 401k, but it will be worth literally hundreds of thousands more if you pull it out when you retire. You aren't just paying the penalties now, you're paying for potentially decades of compounding.
But if by some tragedy you don't die young, your older self is gonna be pissed at younger you for costing him hundreds of thousands of dollars.
The thing is, every dollar you spend on insurance is a dollar (and its interest) you lose. Furthermore, we don't know when it will pop. 1 year? 5 years?
The more reasonable solution is probably gradually reduce exposure to US markets by selling SP500 shares and turning to Europe and emerging markets ETFs. No need to cash out 401k.
If you just look at the past 20 years, the US has had exceptional returns compared to the rest of the world.
The thing is, historically, high PE ratios like what we're seeing in the US do not correlate with short term returns that are as high. Expected future returns decrease as the PE ratios go up in a pretty linear fashion.
https://am.jpmorgan.com/us/en/asset-management/institutional...
If you want a different point to backtest from, try Japan in the 80s and early 90s
I'm not an expert but it looks to my like 80% of my allocation won't be tracking spacex, because it's mid cap or small cap etc, and the 20% that's in the vanguard growth index might? I assume whoever sets the rules for the fund could change the rules to say companies must be listed for X months if they want to avoid this, right?
And I can change my allocation.
edit: Actually wait, isn't it only nasdaq 100 that's tracking it early, after 15 days rather than 3 months of trading? So 0% of my 401k is exposed to buying it quickly after IPO already, I think.
They removed it largely because investors wanted higher returns, and the tech companies that had such dual classes (1) were doing really well, and the S&P ended up caving on that rule.
1: Perennial hot button around here Palantir did this in a more extreme fashion than most. The three founders F class shares will always be at 49.9999% of the votes and the early investors B class shares have 10 votes each as compared to the publicly traded A class shares 1 votes.
S&P 500 includes companies from multiple exchanges. Like Nvidia, which lists on Nasdaq.
https://www.morningstar.com/funds/spacex-ipo-how-index-funds...
> Nasdaq was the first to consider a rule change that would grant mega IPOs like SpaceX early admission to its flagship Nasdaq-100 index. The exchange and index provider began a consultation period in February to assess the viability of and industry response to a proposed “fast entry” rule. The change was approved on March 30 and will be effective on May 1.