When meme stocks were soaring in early 2021, investing based on internet hype may have seemed like a great move for investors. And rather than chasing the latest trends and excitement online, you could have an exchange-traded fund (ETF) do it for you. Launched in early 2021, the VanEck Social Sentiment ETF (NYSE Arca: BUZZ) has focused on tracking 75 large cap stocks in the U.S., "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."
It scours lots of data and the index is sounds like it should be a good way to jump on hot bandwagons in the stock market. Unfortunately, since its inception, it has lost half of its value. By comparison, investing in the boring old S&P 500 during that time would have resulted in losses as well, but at negative 2%, they would have been much more modest. The vast majority of the ETF's losses have come in 2022 as investors have turned away from speculative growth stocks.
Even frequent rebalancing hasn't saved the fund from disaster. Many stocks that are in its holdings are volatile ones, including GameStop (NYSE:GME), Coinbase Global (NASDAQ:COIN), and DraftKings (NASDAQ:DKNG). Without a whole lot of diversification, those struggling investments can have a significant and negative impact on the fund as a whole.
For investors, it's a painful remind that just jumping on the latest trend is by no means a surefire way to make a profit.
