3 popular ETFs with dedicated Reddit followings

Reddit has some fairly interesting communities, or "subreddits". In the investing world, there's the usual ones – r/investing, r/stockmarket, and of course, r/wallstreetbets. Then there's the serious ones, like r/options, r/securityanalysis. Finally, we have the meme stock ones, like r/superstonk, r/AMC, and r/BBBY which can be borderline cult-like sometimes. 

There are also options for ETF investors. A great example is r/LETFs, which is devoted to people trading and holding all sorts of leveraged ETFs (and doing all sorts of things the ETF's prospectus clearly warns against). But there are also subreddits dedicated to specific ETFs.

I think these subreddits are worth exploring because they offer fund managers and other investors insights into the thought processes of the average retail investor. In particular, they're a good example of cognitive biases at play like the shiny object syndrome, groupthink, and endowment effect. 

r/qyldgang

r/qyldgang is dedicated to discussions about covered call ETFs and income strategies. The name comes from their top fund of choice, the Global X Nasdaq 100 Covered Call ETF (QYLD). QYLD is a covered call ETF that pays out very high distribution yields thanks to the volatility of its underlying index.

The investors on r/qyldgang love maximizing income potential. So much so that many of them neglect total returns over chasing yields. The average investor on r/qyldgang has a portfolio comprised of a mishmash of covered call, dividend, and high-yield bond ETFs.

For investors living off their portfolio distributions, like retirees, chasing yields might make sense if your goal is to never sell shares. However, if you're just reinvesting distributions, you're losing out on a lot of upside potential and will likely underperform a regular index fund.  

r/TQQQ

r/TQQQ is dedicated to investors and traders interested in the ProShares UltraPro QQQ ETF (TQQQ), which is a leveraged ETF targeting 3x the daily return of the NASDAQ 100 index. This is a highly volatile ETF often used by day and swing-traders seeking short-term magnified exposure. 

The subreddit is populated by traders, but also has long-term investors who are apparently brave (or reckless) enough to hold a 3x daily resetting leveraged ETF long-term, which is something the prospectus clearly warns against doing. Somebody even put $3 million into TQQQ at all-time highs (ouch).

While volatility drag isn’t too big of a deal when the underlying asset has long-term positive expected returns, TQQQ has numerous other risks. These include high expense ratios and cost of borrowing on its underlying swaps and extremely high volatility. Case in point, TQQQ has lost -76% year-to-date. 

r/ARKinvestorsclub

r/ARKinvestorsclub is populated by fans of Cathie Wood, the fund manager behind the ARK Invest suite of ETFs, which currently include the ARK Innovation ETF (ARKK),  ARK Autonomous Technology & Robotics ETF (ARKQ), and ARK Fintech Innovation ETF (ARKF) to name a few. 

ARKK ETFs promised disruption and innovation and were some of the best-performing ETFs in the low-interest rate bull market of 2020 – 2021. Today, they are down heavily year-to-date as rising interest rates and soaring inflation punished their speculative, growth-oriented holdings. 

You can actually see this happen in the subreddit's history as the sentiment went from bullish mania to bearish despair. A year ago, redditors were predicting high price targets and ridiculing other investors for buying index funds. Now, they criticize Cathie's every trade and make memes about her. 

Disclaimer: This article is limited to the dissemination of general information pertaining to investment strategies and financial planning and does not constitute an offer to issue or sell, or a solicitation of an offer to subscribe, buy, or acquire an interest in, any securities, financial instruments or other services, nor does it constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment.