For those who are retiring in near future it puts great risk on their returns and pensions

I'd argue that for some time now it's made increasing sense to start to diversifying away from large cap-weighted index funds.

Historically indexes like the S&P500 were much less concentrated and more diverse in its holdings across the economy.

For the last few years specifically one could argue that indexes like the S&P500 have become more or less just mega-cap tech funds, and this has resulted in their PE ratios being pushed higher and higher as they index more on growth-oriented valuations vs their more traditional blue chip holdings.

At the same time we've seen rates increase which has made bonds relatively attractive vs stocks again. For investors looking for lower-risk opportunities it seems to me the S&P500 is no longer the best place to put money (and low-risk returns were the reason for many people to invest in diversified index funds during the ZIRP era).

Obviously it depends on your investment strategy and goals, but all this is to say that even before this rule change, if you invested in an index fund like the S&P500 because you wanted to hold a relatively low-risk diverse selection of quality profitable companies at a fair market-valuation you're not really getting that anymore. Instead you're getting a relatively concentrated, high valuation investment all the while valuations and expected returns in other opportunities have become more attractive.

For me personally I've been investing more in small-cap indexes and out of tech to try to balance out my holdings, and this rule change gives me yet more reason to continue to do that. That said, I am very concentrated in tech, but in individual companies I believe in rather than an index fund.

I'm also generally sceptical when investment decisions start to become seen as no-brainer passive investment opportunities, which in recent years it seems investing in the S&P500 has... That's not to say that it's going to collapse or anything, just that it tends to be safe to assume that expect returns may be lower in the coming years.

(I am not a financial advisor, always do your own research)

Personally I am really frustrated about these changes because they are making people lose faith over an financial instrument, some of the only ones which actively work for everyone included rather than only the large investors but they are changing rules minutely to bend towards it.

Index funds are still really great even after this I must admit, really scummy move by Nasdaq and Also S&P.

I think that personally I am interested in world stocks like VTI which can have a less sizable influence as compared to directly S&P 500.

Now, there are some other funds like Dimensional (DFA) which supposedly don't allow such rules of IPO's.

I think that dimensional is great, Any of the two are great if done with good taxation optimization but there is also the fact that there is enough amount of capital already in index that if SpaceX were to fall down for example, there would be impacts on Google/other-tech/Nasdaq (And maybe S&P stocks) that the difference might seem negligible

but the best part seems to me the fact that you wouldn't be forced to buy an bleeding company at a really expensive price when you might use dimensional.

Both seem great to me, I am still a bit sentimental to Passive investments, I hope that there are better regulations kept to prevent such blatant amounts of corruption within the markets.

It also depends on your risk factors as well. I would be interested in hearing your thoughts too.

I recommend watching Ben felix's videos about these mega-IPO's and additionally Dimensional and index funds too.