Sunday, 20 June 2021

Loving your meme stocks? Let's take a look at BUZZ ETF and FOMO ETF

So this week, I released an article based on an article from Bloomberg titled: The FOMO economy: Is everyone making money except you? It mentioned that the BUZZ ETF and FOMO ETF were both created due to this new trend of meme stocks or social sentiment where communities rally together to bring a stock up or down. Lets explore a little more into each.

Buzz ETF (VanEck Vectors Social Sentiment ETF)

For the BUZZ ETF, it was created on 2 March 2021 which is rather recent and the issuer is VanEck hence the full name is VanEck Vectors Social Sentiment ETF and listed as BUZZ. It has about 75 holdings/companies in it which we will look through in awhile.

VanEck Vectors Social Sentiment ETF (BUZZ) seeks to track, as closely as possible, before fees and expenses, the price and yield performance of the BUZZ NextGen AI US Sentiment Leaders Index (BUZZTR), which is intended to track the performance of the 75 large cap U.S. stocks which exhibit the highest degree of positive investor sentiment and bullish perception based on content aggregated from online sources including social media, news articles, blog posts and other alternative datasets.

-There are many familiar companies in the top 10 holdings (*Holdings are accurate as of 16 June 2021, there are some changes to the current holdings as below where it has been updated on 17 June 2021)

Looking at the white paper ( a report to inform readers concisely about a complex matter) of BUZZ ETF, it is really quite engaging and you can see it really trying to relate to the masses by bringing a lot of data about social media in. It starts out with a great title: Join the Swarm Invest in the Power of Collective Conviction

It opens up first by writing how sentiments drives the market, just like previous bubbles where sentiments have been described in a negative light but in recent years especially after the pandemic hit, technology has helped us to stay connected, collaborate and share investment ideas.

FOMO ETF

FOMO ETF is even younger than BUZZ and was created in 25 May 2021. It is a fund managed by the Tuttle Capital Management and is listed on BATS Global Markets. The fund name as you expected is called The Fear of Missing Out ETF, expense ratio is pretty high at 0.90%. The principal investment strategy un like social sentiment which is based on social media platforms, FOMO ETF uses informed agility where they can navigate through the turbulent times we currently face. Another strategy is that they cut through the chatter and market noise to focus on the "important" news.

FOMO would make you think that the top 10 holdings will be more on stocks that have experienced parabolic growth over time however the holdings do show otherwise as we see companies like Walmart, CVS, home depot and Citibank (*Holding accurate as of 15 June 2021).

What place do these stocks have in your portfolio?

These ETFs have arise because investing for the new generation has changed as focus is more hyper growth rather than value investing. Innovation and new ideas are really the way companies can differentiate themselves. Of course, if you are thinking of making a quick buck or to invest in companies based on social sentiment, there is a larger amount of risk involved. So definitely, I would always first look at my risk profile, portfolio size before deciding if I will buy into stocks based on social sentiments. This way of managing risk definitely wouldn't make me a millionaire in the short run but at least I am putting my money based on other's opinions. Looking at S&P 500 growth, I would think that fundamentally if you stayed the course, you would still have experienced quite a nice growth. It is really interesting as we start investing and finding out that there are so many new and indigenous ways that can bring us wealth. Hope you guys find this article/video informative. Stay safe and well.

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References: 

https://etfdb.com/etf/BUZZ/#etf-ticker-profile
https://www.vaneck.com/us/en/investments/social-sentiment-etf-buzz/holdings/ https://www.vaneck.com/buzz/buzz-whitepaper.pdf
https://fomoetf.com/

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