Here’s how much 5% invested in Tesla would have added to index fund investor return

Here’s how much 5% invested in Tesla would have added to index fund investor return

The index fund has thoroughly disrupted the role of active stock pickers in the market, but in an era of accelerating disruptive business models across sectors of the economy, stocks like Tesla remind investors that they still need to make some conviction bets to generate above-average returns.Tesla will begin trading next Monday morning, as part of the S&P 500 index through which most investors now get their core U.S. large-cap market exposure. Many index fund investors may be wondering what it will mean — both the potential gains and risks — for their portfolio to get a dose of Elon Musk's high-flying electric vehicle and renewable energy company after its huge run in 2020.The answer: Not all that much of a difference. At the relatively small weighting that Tesla will have in the index, even as one of its largest holdings, Tesla will not hold outsize influence over an index fund investor's return whether it goes up or down by a lot in any given year.The Tesla S&P 500 inclusion event, by one measure, is a sign of just how powerful index investing has become — it is the biggest stock addition ever and it is being done all at