SPY got totally creamed on TSLA. Look at TSLA chart on a split adjusted basis. Nov 2020.
When TSLA got included in the index, the shit got frontrun like crazy (and the stock got split so retail wouldn't realize the insane run up). So not only did index funds have to buy a bunch of TSLA at higher prices because the rest of the market knew they were going to buy, now the reverse is happening. TSLA's market cap is dropping thus requiring the index to sell TSLA.
Market cap weighted indices are increasing their positions on things that go up and decreasing their positions on things that go down. And there's *SO* much money involved. I just don't see how this can be healthy for long term market cap weighted index returns.
Am I fundamentally misunderstanding something?
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