SpaceX Might Soon Be Joining This Ultra-Popular Vanguard ETF. Is It a Buy Right Now?

As of June 12, Space Exploration Technologies (NASDAQ: SPCX) -- better known as SpaceX -- is officially a publicly traded company. Elon Musk has become a trillionaire, and retail investors are scrambling to add the stock to their portfolios. The stock closed the first trading day up roughly 20% from its initial public offering (IPO) price, and as of Tuesday afternoon, its market cap was around $2.5 trillion. That means it will be influential as it starts being added to ETFs.

While the easiest way to get exposure to SpaceX is simply to buy the stock, some ETFs -- based on their index methodology -- can add it relatively quickly. Others will not.

S&P Global, the overseer of the S&P 500 index, said that it won't make an exception to its 12-month waiting period rule before SpaceX can be considered for entry. That means SpaceX and presumably Anthropic and OpenAI won't be able to join the index for at least a year after they go public.

Not every index provider, however, has the same rule. Some of them will bring new stocks into their indices mere days after an IPO.

Source: Getty Images.

SpaceX is likely to show up in the Vanguard Total Stock Market ETF within days

The Vanguard Total Stock Market ETF (NYSEMKT: VTI) could add SpaceX to its portfolio in as little as five days. This is based on the selection methodology of the fund's underlying index, the CRSP US Total Stock Market Index.

A "fast inclusion" policy has actually become the norm among several major index providers. The CRSP, FTSE, and Russell indexes all allow for inclusion following the 5th trading day post-IPO. The MSCI indexes can include them after the 10th trading day. The Nasdaq-100 index, which underlies the popular Invesco QQQ ETF (NASDAQ: QQQ), could include SpaceX after 15 trading days.

The S&P indexes are the only major ones that will put a significant delay on SpaceX's inclusion.

VTI is a buy, but not because of SpaceX

The overall objective of the Vanguard Total Stock Market ETF is to provide broad U.S. stock market coverage in a simple, ultra-low-cost package. It's not to get the latest hot stock into the fund as quickly as possible.

Even after SpaceX is added to the index and the fund, its overall allocation will remain comparatively minimal.

SpaceX has a market cap of around $2.5 trillion. That puts the stock somewhere between Broadcom and Amazon in terms of size. Those two stocks have weightings of 3.6% and 2.9%, respectively, after the June 12th market close. When it's fully reflected, SpaceX is likely to have a weighting of around 3% in the ETF.

But even that might take time. Vanguard indicated that:

"The resulting Vanguard portfolio changes for SpaceX are expected to be limited, as portfolio weights are anticipated at first to be 1% or less. That should help keep turnover and tax impact low with little change to portfolio tracking."

That means Vanguard isn't planning on loading up on SpaceX stock all at once. With so many ETFs looking to allocate to the stock quickly, any massive buying could move the stock price. Vanguard's conservative operational style will understandably take a little time to invest appropriately in the stock.

If you're going to invest in the Vanguard Total Stock Market ETF, do it because you want to build out the core of your portfolio with a high-quality, low-cost fund. SpaceX's influence will be minimal and shouldn't be a deciding factor.

David Dierking has positions in Vanguard Total Stock Market ETF. The Motley Fool has positions in and recommends Amazon, Broadcom, and S&P Global. The Motley Fool has a disclosure policy.