Curious how someone with a 401k, who didn't want their retirement to be used by these companies to buy at an inflated price, would go about opting out of this.
Typically I just have my 401k in an index fund so that things have to become established before they're added. This seems like it's circumventing that, and I would be inclined to vote with my wallet. But everything around 401k index funds that I see are very opaque, so it's not totally clear to me how I would avoid this if I wanted to.
Technically I think this would be fairly straightforward. You could keep the index fund and then short the stock you believe is overvalued, to the degree it's weighted in the index fund. That would give you stock market exposure equivalent to the index without the company you don't believe in.
But I would strongly advise you to NOT DO THIS.
The above position makes it explicit that your thesis involves shorting a stock that could go through the roof in value. That emphasizes what a risk you're taking with your thesis. If your typical investment approach is to just buy index funds, then carry on just buying index funds and let the market do its work.
By the way, if SpaceX, Anthropic, OpenAI etc were to be excluded from the indices, then professional investors would just start a trade the inverse of the one I outlined above - i.e. they'd start shorting your index fund to the extent it was underweight in those companies, in order to profit off the exclusion of those tickers from it.
If you're in this for the long term (which I assume you are given this is your 401k), don't try to second-guess the market short-term.
If your 401k offers it you could look into an "equity income" fund. Not for the dividend income per se, but because these a are big stable companies with a track record of paying dividends.
Also, consumer staples are known for holding their ground during downturns.
But the general advice given is to accept that you probably can't beat the market so don't overthink it and just own the whole thing.
Also keep an eye on expense ratios. A lot of 401k providers gouge you on anything but the basic funds. So you'd have to beat the market by that much more.
You have to lookup what your index fund is. They all have always had different inclusion rules and they may or might not have changed theirs recent to try to include SpaceX.
I think I'm looking at general "retirement funds" which are a little more opaque. e.g. Vanguard/TD retirement funds, when I looked into them, didn't have any information on "what is in them." Just general breakdowns.
Vanguard offers a bunch of ETFs so I can't exactly give you a solid answer.
One of their specific etfs (VTI) tracks the CRSP US Total Market index [1] which has its methodology described here [2] and looking at the "CRSP INVESTABILITY SCREEN SUMMARY" it sounds to me like SpaceX would be added to VTI after 5 days ("Seasoning of New Securities - 5 days or greater if satisfying the fast-track IPO rules".
[1]: "The Fund employs an indexing investment approach designed to track the
performance of the CRSP US Total Market Index (the “Target Index”), which
represents 100% of the investable U.S. stock market," https://personal1.vanguard.com/pub/Pdf/sp970.pdf
Typically I just have my 401k in an index fund so that things have to become established before they're added. This seems like it's circumventing that, and I would be inclined to vote with my wallet. But everything around 401k index funds that I see are very opaque, so it's not totally clear to me how I would avoid this if I wanted to.