[DigitalToday reporter Hyunwoo Choo] After SpaceX's initial public offering (IPO), practical advice has emerged that retail investors can invest indirectly through ETFs and mutual funds without buying IPO shares directly. On June 12 (local time), CNBC reported that some index-tracking funds could add SpaceX within a few days of the listing, and some active funds already hold stakes from before the listing.

If SpaceX lists at $135 a share, its valuation would be estimated at about $1.8 trillion. That would make it the seventh-largest by market capitalisation in the United States. Experts, however, pointed out that buying an individual stock right after an IPO can be too volatile for ordinary investors and offers less diversification.

Index-fund investors can hold SpaceX relatively early, although the timing differs by index. The Russell U.S. indexes can add a mega-cap stock like SpaceX five trading days after listing. FTSE and CRSP follow the same schedule. MSCI adds after 10 trading days, and the Nasdaq 100 can add after 15 trading days if it ranks in the top 40 by market capitalisation. Funds tracking the Russell 1000 or the CRSP U.S. Total Market Index are examples.

Inclusion in the S&P 500 could take longer. S&P Dow Jones requires at least 12 months after listing and profitability based on the most recent quarter and the sum of the most recent four quarters. Jay Ritter (제이 리터), head of the University of Florida's IPO Initiative, said SpaceX may be unable to enter the S&P 500 for years because of the profitability requirement. The S&P Total Market Index, however, can add it after five trading days.

Some index providers eased their rules to add mega IPOs faster this year. Senator Elizabeth Warren raised concerns about investor protection. Warren said SpaceX shares worth billions of dollars could be bought automatically regardless of index-fund investors' intentions.

Active funds can reflect a SpaceX weighting without waiting for index inclusion. As of June 1, eight active funds held SpaceX positions exceeding 10 percent of net assets. The Baron Partners Fund invested 37 percent of its assets in SpaceX. If money floods in, however, SpaceX's weighting could be diluted, and the fund could be more vulnerable to share price swings.

Buying directly is the cheapest and most straightforward method, but it also carries high risk. Ritter said SpaceX's IPO is likely to surge on the first day and then underperform the market's return over the following one and three years. He assessed that the scope for a large additional rise is also limited because the valuation is already high. He added that an individual stock can be used for tax-saving strategies that offset losses against other investment gains.