February 2020 - Tesla has increased to a $150 billion market cap and still has not made a yearly profit. In the last 25 years, technology stocks have had a long run way for profitability. Amazon would be the other example of a stock trading at high valuations before it started to report profits. The price of these stocks may be traded up initially by a limited pool of investors willing to take on the risk of unproven business models. However, once these stocks reach market capitalization milestones, they are added to indexes. Then, the risk is distributed to a broader population through ETFs and mutual funds. One solution is to come up with ETFs which can pool together large capitalization stocks and avoid non-profitable companies.
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