I have an index fund for NASDAQ with my broker. When I bought into the fund, the broker promised me that with my money, they will buy shares in companies traded on that exchange according to the specific formula that SpaceX is manipulating here. My broker is obligated to buy. They could open a new fund that has a contact like "we'll keep doing what we had been doing except for the whole SpaceX thing" but they would need my permission to move the money. And I'm only in this fund because it was recommended by my 401k provider -- I don't know anything about any of this. That's the messed up thing here -- the people being screwed are not sophisticated investors, it's nurses and school teachers who hope to retire.
Yeah basically this. These shenanigans water down the value of QQQ. The bottom line is if you don't like QQQ, then dont buy it. Buy the stocks separately or a different index. But for people who don't pay attention, or for people whose 401k's limit their investment options, it is difficult / impossible to avoid the shenanigans
If the rules used to compute the index change (as opposed to the index composition of course), are index funds obliged to follow them no matter what? I assume this is very fund dependent, but would be interesting to know what most guarantee.
and that's why sector specific indexes are not "good" - only broad market (heck, even global) indexes are worth passive investing for.
A nasdaq index is no different from any other thematic index (like an oil index, or a robotics index). Thematic indexes tend to fail the investor in the long term for capturing beta. But because of lack of knowledge of the _actual_ academic research by retail investors, a lot of clever marketeers sell the idea of a thematic index as tho it is similar to a broad market index ("safety" and diversification).
Caveat emptor.