When SpaceX went public in June 2026, plenty of investors thought the price was silly. The rocket company came to market valued at about $1.77 trillion at its $135 offering price, and it did not make a profit.
The skeptics were right. The stock traded below $105 at one point in early August. By the August 26 Journal it was back around that same $135 offering price.
So the people who rearranged their portfolios to avoid it made money. Right? Not really.
The switch that did nothing
Here is the setup. Several index families loosened their rules so a giant new listing like SpaceX could join fast. The S&P 500 did not. It still makes a company trade for a year and report profits first.
So an investor could dodge SpaceX entirely by owning an S&P 500 fund instead of a total-market fund. Plenty did exactly that.
The Journal ran the scoreboard on August 26. Measured from just before SpaceX joined the Morningstar U.S. Total Market index, both indexes returned about 2.5% through the Friday before. The total-market index was slightly ahead.
All that maneuvering to be right about one company, and the result barely moved.
Why the trap keeps working
The reason is simple. When you swap indexes, you are not betting on one stock. You are betting on every difference between the two lists.
The investor who dodged SpaceX also stepped away from small and micro-cap stocks, which surged. One good call, one bad one, and they canceled each other out.
The long-run gap between those indexes is small anyway. Over the past decade the S&P 500 has topped total-market benchmarks such as the Morningstar index and the Russell 3000 by about half a percentage point a year, according to FactSet.
Researchers at Acadian Asset Management made the point in a 2024 study. Predicting the long American large-cap boom would have been very hard at the time. Predicting the next stretch of small versus large is no easier now.
None of this is an argument against index funds. It is an argument against treating them like trading chips.
The expensive version of the same mistake
Index shopping is the polite form of performance chasing. The rough form looked like South Korea.
Korea's Kospi more than tripled on faith in the artificial-intelligence boom, then fell roughly 40% over six weeks in June and July 2026. That erased about $2.5 trillion in market value. It has since bounced about 20% off the low.
Individual investors do 60% to 70% of the daily trading there. The newcomers included stay-at-home mothers, students and retirees cashing in pensions. System-wide margin loan balances rose $7.9 billion in six months, to $27.1 billion.
What actually blew people up was a product launched on May 27: single-stock leveraged funds. If the stock rose 5% in a day, the fund rose 10%. If the stock fell 5%, the fund fell 10%.
| Korea's round trip | Reading |
|---|---|
| Kospi gain in 2025 | 76% |
| Six-week fall, June–July 2026 | about 40% |
| Market value erased | about $2.5T |
| Margin loan balances, after six months | $27.1B |
| Share of daily volume from individuals | 60–70% |
Jake Cheong, a 30-year-old accountant in Seoul, had warned his friends the rally would end badly. Then he put about $29,000 into one of those leveraged funds. The position later sat near $9,000. He blamed the fear of missing out.
Jason Zweig described the same machinery in the July 11 Journal. Investors in the first batch of bitcoin ETFs lost an average of 5.8% a year, by one Morningstar analyst's estimate, even though bitcoin itself rose over that stretch. They poured in near highs and pulled out near lows, over and over.
The fix is not clever. Decide how much of your money belongs in stocks, own that cheaply, and rebalance back to the number rather than to the headline.
Nobody rings a bell at the top. But the moment you move money to be right about one company, you have stopped being a passive investor. You have just hidden the bet inside a fund.