SpaceX IPO Could Soon Show Up in Your Retirement Account Whether You Want It or Not
Even if you don’t own shares of SpaceX today, you may still end up investing in the company sooner than you think.
That’s because SpaceX’s blockbuster initial public offering (IPO) didn’t just make headlines for its extraordinarily high valuation. The company has now joined several major stock indexes, a move that automatically makes it a holding in many index funds and exchange-traded funds (ETFs), including those commonly found in retirement accounts.
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For long-term investors, this means that SpaceX’s stock performance could now become part of their retirement savings portfolio, even if they never buy a single share themselves.
How SpaceX Is Now Part of Many Retirement Portfolios
Reuters previously reported that SpaceX’s massive valuation would likely earn it a fast-track spot in the Nasdaq-100. That prediction has now become reality, according to Investing.com.
SpaceX was added to the Nasdaq-100 on July 7, paving the way for passive investment funds that track the index to buy shares of the aerospace and telecommunications company. The company has also been added to other major indexes, including FTSE Russell and MSCI indexes.
For retirement savers, your takeaway here is simple: If your 401(k) account or IRA includes a Nasdaq-100 fund or similar index investment, your retirement portfolio may include SpaceX without ever placing a trade.
Why Investors Should Expect Volatility
While index inclusion can increase demand for a stock, it doesn’t mean that prices will continue rising.
Reuters also reported that analysts and portfolio managers expected SpaceX shares to remain volatile because of the company’s relatively small public float and very high valuation. Following its surge after its IPO, SpaceX shares fell during their Nasdaq-100 debut as investors reacted to broader market conditions and weighed whether the expected index demand had already been priced in.
The company’s early trading has also been somewhat unusually active. Shortly after its IPO, SpaceX saw heavy options trading – more than one million options contracts changed hands during a single trading session. Large options activity can contribute to sharper price swings as market makers adjust their positions.
What SpaceX Means for Retirement Investors
For retirement investors, it’s important to look past the big SpaceX news regarding its historic IPO, or even its post-IPO turbulence. Instead, what should matter most for retirement investors is that one of the market’s newest and most valuable companies is now part of many diversified portfolios simply because index funds are designed to follow the market.
As long as SpaceX remains in major benchmarks, millions of investors could see the company’s performance reflected in their retirement accounts, whether they intentionally bought the stock or not.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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