I'm not sure what it is with Gen Z, but the concept of a simple, good old-fashioned low-cost index ETF seems to be lost on them. Gone are the days of a simple three-fund portfolio of Vanguard ETFs.
Today, your average Zoomer investor is likely to have a "Fund Frankenstein" portfolio of niche thematic ETFs. There's literally an ETF for every investment theme you can think of. At Trackinsight, we're no strangers to weird thematic ETF ideas. Don't believe me? Give the Trackinsight Thematic Explorer a try and see for yourself.
Earlier this year, our writers bought you the BECKY ETF, a hypothetical fund tracking the stocks of 10 companies loved by upper-middle-class American women. In May, I covered the idea of an Inverse Cramer ETF (which is now becoming a reality) and covered the idea of a meme stock ETF extensively (which also became a reality with single-stock ETFs).
Of course, most of these remain hypothetical examples…for now. That being said, there are some concrete examples of extremely novel and interesting thematic ETFs on the market right now. Let's look at the three I find the most interesting.
Investing in breakfast?I have a feeling some portfolio manager at Direxion was having breakfast one day when they suddenly realized: "I bet I could securitize what I'm eating ."The result was the Direxion Breakfast Commodities Strategy ETF (BRKY), one of the few non-leveraged ETFs in their lineup.
BRKY tracks the S&P GSCI Dynamic Roll Breakfast (OJ 5% Capped) Index. The fund holds various futures contracts tracking corn, coffee, lean hogs, orange juice frozen concentrate, sugar, and wheat, weighted based on their world production with the exception of orange juice, which is capped at 5%.
In my opinion, BRKY is best used to express a view on declining food security and inflation. A good way to think about it is as a very niche commodity ETF. If you don't like oil or precious metal exposure in your commodities ETF, BRKY might be the way to go.
Investing in vice?Imagine all the "bad habits" that humans partake in – smoking, drinking, gambling, fast food, etc. Now securitize that. The result would be the AdvisorShares Vice ETF (VICE), which holds a portfolio of global companies involved in those industries.
This can pretty much be thought of as an "Anti-ESG" ETF, and there's some good rationale behind it. Firstly, many of the companies in VICE are counter-cyclical in terms of performance and possess wide economic moats and evergreen, multi-national demand.
Thanks to the large-cap, blue-chip nature of many of its holdings, VICE also pays a fairly attractive dividend yield. Personally, I would have liked the inclusion of firearms and marijuana stocks, although AdvisorShares has dedicated ETFs for the latter.
Investing in memes?Last but not least, we have ETFs that invest in meme stocks. For a thorough discussion of what meme stocks are and how a meme ETF would work, give my previous article linked above a read. In any case, investors looking to bet on meme stocks can buy the Roundhill Meme Stock ETF (MEME).
MEME was the first ETF explicitly dedicated to tracking meme stocks. They even have their own index with Solactive, the Solactive Roundhill Meme Stock Index. The ETF targets 25 equally weighted U.S. stocks that garner strong social media attention and possess high short interest.
This strategy makes MEME a very volatile ETF. So far in 2022, MEME has a standard deviation of 39.95%, compared to the S&P 500 at 21.60%. If you want enhanced exposure, the ETF has an options chain. Finally, what's really funny and worth noting is MEME's expense ratio of 0.69%.