General Motors (GM) built its first cars long before Nasdaq existed. On Tuesday it said it's leaving the New York Stock Exchange for the younger market. GM expects Nasdaq trading to start Nov. 17. The stock symbol stays GM. Shares rose 5.6% to $80.56 on the news. The reason is an index, and that's where your money comes in.
The Journal's Colin Kellaher reports that GM's market value tops $64 billion. That's big enough for the Nasdaq-100, an index of the 100 largest nonfinancial companies listed on Nasdaq. You can't get in from the NYSE. Switch exchanges, and the door opens. If GM is added, every fund that tracks the Nasdaq-100 has to buy its shares. That built-in buying is the prize. Walmart (WMT) made the same jump late last year. Hilton said last week it's moving in early November. Nasdaq has also been winning the hottest new listings, including SpaceX's $86 billion IPO this year.
A long way from 1911
GM first listed on the NYSE in 1911, the first automaker on the Big Board. The NYSE itself dates to 1792 and was the home of blue chips. Nasdaq is the younger market, started in 1971. Apple and Amazon listed there as small, scrappy companies in the 1980s and 1990s, and that's how it built its reputation. GM's own history has a gap. It was delisted in 2009 when it filed for bankruptcy in the financial crisis. It came back with a 2010 IPO after a government rescue. Its last NYSE trade is at the close on Nov. 16.
Here's the part for your plan. A lot of people own a Nasdaq-100 fund because they think of it as the tech fund. It isn't, quite. It's the hundred biggest nonfinancial companies on one exchange. Walmart already lives there. Now maybe a Detroit carmaker. Nothing wrong with that. But the fund picks by where a company lists. What the company makes doesn't come into it.
Our read
This is an Investments story, the IN04 kind. Index funds are a great deal, and they're also a rule that buys whatever fits the rule. Change the listing, and the rule changes what it buys. GM's 5.6% pop on Tuesday looks like the market guessing at that buying. For us, the lesson is to know what your index fund actually holds. The nickname won't tell you. QQQM, the Nasdaq-100 fund, is held at weight in 4 books and Walmart in 12; nothing added. GM isn't held, and we don't buy a stock because an index might.
The concrete thing in your plan is the overlap in your funds. This week, pull the top ten holdings of your S&P 500 fund and your Nasdaq-100 fund and set them side by side. Most people find the same handful of names at the top of both. That's one bet counted twice, and it's worth knowing before the next rough month. We'd rather you see the overlap on a calm Tuesday. That's what a review is for.