Summary

• Tesla's 2020 S&P 500 entry showed forced index buying lift a stock about 70% with no fundamental change.
• Passive now holds about 55% of U.S. fund assets and buys by market cap, concentrating capital in the top 10 names that already make up 40% of the index.
• The efficiency worry is that mega caps rise on flows while strong small caps get ignored.
• The bear case isn't airtight, since factor ETFs still react to fundamentals and 79% of active large cap funds lagged the S&P 500 in 2025.
• I keep buying VOO and QQQ, but SpaceX's forced inclusion and a possible 75% to 83% ceiling are reasons to stay alert.

The Market May Be Broken

On 17 November 2020, S&P Dow Jones Indices announced it'll be adding Tesla (TSLA) into the S&P 500 (SP500). From one day to another, every single ETF that tracks the S&P 500, such

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