Meme stocks are a new phenomenon since the pandemic. Investments like GameStop (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC) have taken off even despite troubling outlooks for their respective futures. Internet hype and retail investors betting on these risky stocks has propelled their share prices to incredible gains this year, as both have soared by hundreds of percentage points in 2021.
Staying on top of the latest meme is no easy task as what's popular tomorrow may not be in a few weeks. But for investors who are willing to stomach the risk of meme stocks, there's a new exchange-traded fund (ETF) that can help. The Roundhill MEME ETF (NYSE Arca: MEME) launched on Dec. 8 and it targets U.S.-listed stocks that "exhibit a combination of elevated social media activity and high short interest." The index gets rebalanced every two weeks and it only contains 25 holdings. Despite the frequent rebalancing, the fund's expense ratio is a fairly modest 0.69%.
As of Dec. 12, the top five stocks in the fund included Digital World Acquisition Corp (NASDAQ:DWAC), Roku (NASDAQ:ROKU), ContextLogic (NASDAQ:WISH), Snap (NYSE:SNAP), and DraftKings (NASDAQ:DKNG). Each of those stocks account for more than 4.3% of the fund's total weight. That's a lot weighted in just five stocks and it doesn't give investors much stability or diversification.
However, this is still a safer approach to investing in meme stocks than trying to do it on your own. The only problem is that given the frequent rebalancing and the potential for high turnover, you can't always be sure what you're investing in with this ETF.
