I just invested in the most overvalued piece of junk going around:
Elon’s latest trillion-dollar trouser-tickler, SpaceX.
I didn’t have a choice. My index fund bought it for me. Automatically.
Because that’s what index funds do. They buy a tiny slice of the biggest companies, and SpaceX just elbowed its way into the club.
And … I really don’t care.
Now, you may think old Barefoot has foot fungus.
After all, the media has been warning us of the impending DANGER:
“Elon Musk is about to change everything we know about the world of finance in a move experts say will expose millions of Aussies to a new level of risk.”
“Experts warn we’re entering ‘dangerous, dangerous territory’ as the potential concentration of wealth could impact 17 million Aussies.”
“SpaceX risks leaving index fund investors with heavy losses.”
So. Much. Clickbait.
Honestly, I’m so tired of every bloody article being lipsticked with urgency, fear and stress.
So, calmly, the question you want to know is this:
Am I an idiot for investing in a simple, low-cost index fund that buys SpaceX just because it’s a certain size, without even thinking about how much of a stinker this investment could be?
After all, the company lost almost $US5 billion last year. In the first three months of this year alone, it burned through another $US4.3 billion.
That’s the boring numbers stuff buried at the back of the prospectus that only weirdos like me read.
The cool stuff is all the phallic full-page pictures of rockets, and their ballsy aim of the “establishment of a permanent human colony on Mars with at least one million inhabitants”.
Men are from Mars. Elon is from Uranus.
Now, here’s the bit the headlines forget to mention.
I called Vanguard and asked them what proportion SpaceX would make up of my international index fund.
“We expect it to make up somewhere around 0.06 to 0.08% of the index”, they said.
Let’s put that in perspective.
If you have $1,000 invested in an international index fund, your holding in SpaceX comes to:
60 cents.
Sixty.
Cents.
That’s what all the fuss is about.
Yes, SpaceX looks wildly expensive. Yes, AI is being hyped to the heavens. But my index fund owns more than a thousand companies alongside SpaceX and automatically trims the losers.
You know what I love more than spaceships?
Beating the experts who feed the media these headlines.
The annual SPIVA report scores every active fund manager in Australia against the index. Last year, 74% of them lost to it. Over fifteen years, 87% lost to an index fund. Nearly nine in ten.
The people screaming loudest about the danger of index funds all want the same thing:
Your money. Don’t give it to them.
If SpaceX blows up, I lose sixty cents. I’m comfortable with that trade.
Tread Your Own Path!