Tesla Enters S&P 500 Stocks – Here’s What You Need to Know!

Even though the U.S. economy entered a downturn recently, the securities exchange has been on fire. And one of its breakout stars has been Tesla (TSLA), which has encountered a 700% bounce in stock rate since the beginning of 2020.

Read – Trump tweets support for Tesla reopening during deadly pandemic

In the wake of its unexpected exponential growth, the brand established by Elon Musk has been welcomed to join the S&P 500 Stocks on December 21. It’s an esteemed honor reserved for America’s top traded on the open market organizations. However, this good news isn’t reserved only for Tesla or Musk’s stakeholders. The general public is to benefit from it as well.

News18 | Tesla has recently made its way into S&P 500 Stocks

Since Tesla is now a part of the S&P 500 Index, you can buy its stocks by investing in its shares and trade-exchange exchange funds. Also, it implies that the normally balanced market index might observe a couple of twists and turns because of this somewhat overvalued ― and possibly volatile ― stock.

Here’s a closer look at everything about Tesla’s entry into the S&P 500 Index.

What the S&P 500 Index stands for?

The S&P 500 Stock is a market capitalization-weighted stock of 505 American huge-capital shares across 11 departments. It makes up for around 80% of the U.S value market. Brands in the S&P 500 Index are weighted as per their market capitalization, or the cost per stock multiplied by the number of outstanding stocks. Other crucial companies in this league include Microsoft, Facebook, and Amazon.

Capital | With this, the automotive giant has joined the likes of Microsoft, Facebook, and Amazon

Why is Tesla being included in the S&P 500 Stock?

The price of Tesla stock has shot up recently. The organization officially turned eligible to join the S&P 500 Index after posting its 4th consecutive quarterly benefit in the 2nd quarter of 2020. Now, Tesla is the 6th largest organization in the U.S., behind Microsoft, Apple, Alphabet (Google’s parent company), Amazon, and Facebook.

The entry of Tesla in the S&P 500 Stock will probably stir up the market, particularly in the short term. However, considering the meteoric ascent of its stock price, many are concerned that it’s overvalued and could slam down sooner or later.

Read – Elon Musk tweets and Tesla stocks plummet

How buying Tesla stocks can affect your portfolio

Tesla’s entry in the S&P 500 Index accounts for around 2% of the stock market’s cap. That’s not a big slice at first instance, but it will influence your portfolio big time if you make the switch. After the announcement, Tesla’s shares bounced up by 41% that it would enter the S&P 500 Stock. This is very similar to the spikes that significant organizations like Yahoo and Facebook faced when they were included.

Chicago Tribune | Tesla’s shares bounced up by 41% after the announcement that it would enter the S&P 500 Stock

When the buzz wears off, Tesla’s stock prices will probably withdraw. But then shareholders almost always expect volatility across the list, reserves that track the S&P 500 Index, and the market as a whole.