SpaceX Stock Joins Major Index Funds—What Regular Investors Need to Know Now

Key Takeaways

• SpaceX shares tumbled in recent days after soaring in the first few sessions following the company’s historic IPO.

• The iShares Core S&P Total U.S. Stock Market ETF and Vanguard’s Total Stock Market ETF now include Elon Musk’s rocket, connectivity and AI company among their holdings.

• The inclusion of SpaceX in index funds means that a wider swath of investors have exposure to the stock.

SpaceX’s (SPCX) volatility could hit home for many investors—even for those who didn’t buy a single share.

The newly debuted stock is down more than 25% from last week’s highs, though it was recovering ground Tuesday despite a broad tech sector rout. Its performance will matter to a wider swath of investors than before because the stock was just included in major indexes and prominent funds that track them.

Vanguard’s Total Stock Market ETF (VTI) and BlackRock’s iShares Core S&P Total U.S. Stock Market ETF (ITOT) have modest weightings in SpaceX as of this week, according to their respective holdings information. Those funds bought the stock, mirroring indexes from the Center for Research in Security Prices and S&P Dow Jones, which were among the first wave to include it.

WHY IT MATTERS TO YOU

SpaceX’s inclusion in major indexes means its performance will start to show up in funds that are often found in retirement accounts.

SpaceX’s entry into the zeitgeist—it was the talk of the town in the months leading up to its record IPO—inspired major index providers to tweak their rules to fast-track the stock into their products. That will continue to ripple across the funds complex as others add it. FTSE Russell and MSCI are set to add it in the coming days.

If SpaceX keeps rising, investors won’t mind. And it bodes well for their portfolios that major index inclusions tend to provide a bit of lift in the days leading up to the event, as funds that need to do so buy the stock. However, hot new stocks have a historical tendency to pop, and then fizzle in the first few years in the public market, and lag benchmarks.

For now, investors in index funds such as the Vanguard Total Stock Market and iShares Core S&P Total U.S. Stock Market will have to squint to notice SpaceX’s influence, because the stock is just one of thousands of other holdings and makes up a fraction of a percentage point in terms of portfolio weight.

Funds tracking the Nasdaq 100, which will hold a relatively larger chunk of the stock, may see bigger hits, up or down. SpaceX could be added to the Nasdaq 100 as soon as early July.

After three straight sessions of losses, SpaceX shares were up 6% recently at around $164. They fell as low as $147 early in the session, dipping below their opening price of $150 on the first day of trading on June 12. The company priced its IPO at $135.

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