FOMO ETF is live: Should you be afraid of missing out?

Much has been written about the FOMO ETF before it even reached the market. It was registered back in March during the epic saga featuring Reddit’s r/wallstreetbets. The forum, which describes itself as ‘4chan having found a Bloomberg terminal’, was the source of a social media frenzy over stocks like GameStop, AMC, Nokia and BlackBerry.

Those ‘meme’ stocks saw their price jump suddenly, leaving a lot of investors on the side, thinking they had missed out. Good news might have finally come to them last week when the FOMO ETF started trading on the Chicago Board Options Exchange (CBOE).

The launch of FOMO ETF (for Fear Of Missing Out) is right on time, as Reddit’s favorite stocks are hitting new all-time highs. For example, AMC, the American movie theater chain, has seen its stock price double over the past week.

FOMO: the “Fear Of Missing Out” ETF

The FOMO ETF is managed actively by Tuttle Capital Management. It does not track any index. The investment firm specializes in active strategies and offers US investors 10 active ETFs for a total of $250m assets.

FOMO’s investment objective is simply defined by its issuer as to “seek to reflect current or emerging trends”. This means the fund may invest in a vast range of products from global equities (large and small) to other ETFs (both leveraged and inverse) but also in volatility products.

The ETF is offered at a 0.90% expense ratio and stands shy of $5m assets under management after only its first few days of trading which is not much considering the press coverage. It might be a bit early to judge the launch’s success with investors but flows in the next weeks will tell the rest of the story.

What’s behind the FOMO ETF?

If you buy the FOMO ETF, you will own parts of all its underlying holdings. This means a thorough analysis starts by taking a closer look at the ETF’s holdings.

Investors might be disappointed to find out that the ETF is not focusing on catching meme stocks trends. It turns out the ETF holds only US stocks as of its latest holdings (June 2, 2021). It invests predominantly in mid-cap stocks but also has a minor allocation to large-cap stocks. Amongst the Reddit Wall Street Bets’ favorites, we can find AMC and GME stocks, accounting for only 0.82% and 0.43% respectively.

However, this might not be all bad for investors. Less emphasis on meme stocks means better diversification with a portfolio made of more than 100 stocks. The ETF is invested across 11 different sectors with Information Technology and Communication Services representing about half of its holdings.

Other ETFs to cure your FOMO

The FOMO ETF is not the first fund trying to ride the social media trends.

The VanEck Vectors Social Sentiment ETF (BUZZ) listed last March. The BUZZ ETF is passive, meaning it is tracking an index. Known as the BUZZ NextGen AI US Sentiment Leaders Index, it contains 75 large-cap US equities. It selects stocks that show the “most positive investor sentiment”. Sources include social networks like Reddit or Stocktwits, but also newspapers such as CNN and Reuters.

Aside from social media trends ETFs, funds focusing on innovation and disruptive technology have grabbed investors’ attention (and flows!) recently. The ARK Innovation ETF (ARKK) in particular has collected an astonishing $6.8bn of new assets year-to-date. Alternatively, the Direxion Moonshot Innovators ETF (MOON) which sets itself out with a more concentrated portfolio collected $215m inflows year-to-date.  Will the FOMO ETF manage to compete for flows with them?

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