Latest Meme ETF Could Help Investors Capitalize on Retail Stock Trends With Less Risk

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Institutional investors and finance experts often advise regular people to steer clear of “meme” stocks, or stocks popularized on social media networks such as Reddit and Twitter. As an alternative, they often recommend exchanged-traded funds, or ETFs, which track the performance of a specific category or group of stocks. ETFs tend to be more stable over time since they are diversified across multiple investments.

See: Invest in Women-Led Companies With These 3 ETFsLearn: 10 ETF Myths Debunked

However, the meme stock trend is difficult to ignore and many retail investors, especially, seek to get in on the action of buying shares of some of their favorite companies, such as GameStop or movie theater chain AMC.

Now, investors have a way to bet on their favorite brands with slightly less risk, by diversifying their stock portfolio through a meme ETF, Reuters reports. The Roundhill MEME ETF is currently seeking regulatory approval from the U.S. Securities & Exchange Commission, and the stocks included have a “high level of mentions on social media, combined with high short interest,” Reuters reports.

Related: 10 ‘Meme Stocks’ You Need on Your Radar Now

The short interest points to positive market sentiment — often in spite of market fundamentals or the profitability of the companies on the exchange. Meme stock prices tend to rise and fall based on the whims of internet influencers, celebrities like Elon Musk and Redditors such as those active on the subreddit r/WallStreetBets.

However, by diversifying your investment across a collection of meme stocks — which will be managed by the investment firm Roundhill Investments — you may see more stability in the long term. Roundhill also manages ETFs focused on stocks in the fields of Esports (NERD), professional sports (MVP), streaming (SUBZ), sports betting (BETZ) and others.

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Roundhill’s MEME ETF isn’t the only game in town if you want to invest in a diversified portfolio of trending brands. The VanEck Vectors Social Sentiment ETF (BUZZ.P), owned by Barstool Sports Inc founder Dave Portnoy and FOMO.Z, managed by Tuttle Capital Management, also track meme stocks. FOMO adds special acquisition companies and crypto to its ETF, which launched this May, for greater balance and diversification.

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Last updated: August 31, 2021

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