Shares of Tesla (TSLA) lost 21% of their value Tuesday after Standard & Poor’s declined to add it to its index of 500 major US stocks. Being added to the index would have required portfolio managers who mirror the index to buy additional shares.— CNN: Tesla shares suffer their worst day ever
There’s also a Fortune 500, distinct from the Standard and Poor’s index of 500 “blue chips” or large cap stocks.
It also goes to show there is no such thing as “passive investing” in an index fund, as such investments are often billed in contradistinction to “active investing” or making conscious human decisions.
A whole slew of technical stock market measures such as stock “beta” traditionally calculated against the S&P 500 have also lost their significance and reliability as performance indicators.
There was a whole Communist Party-oriented “theory” based on passive investing in major index funds, “market” orders rather than limit orders for buying and selling stocks, and “beta” as a standardized measure of risk.
Textbook finance curriculum was effectively “communalizing” the markets toward a centrally managed economy directed by Wall Street and the Federal Reserve.
If Tesla had remained on the S&P 500 index, then so-called “institutional” investors would have had to take their losses, but the fact that the company was actively managed out of the S&P index is evidence that the Establishment no longer wishes to risk its institutional funds in pipe dreams of environmental extremism and delusions of patentable intellectual property.