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An ETF to Track Market Sentiment Before Investing

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If you are an ardent follower of market sentiments before making investment decisions, you can now have a bunch of such trending stocks in one basket. The product is VanEck Vectors Social Sentiment ETF (BUZZ - Free Report) . The fund was launched on Mar 2, 2021.  Let’s delve a little deeper.

Inside BUZZ

VanEck Vectors Social Sentiment ETF (BUZZ - Free Report) looks to track, before fees and expenses, the price and yield performance of the BUZZ NextGen AI US Sentiment Leaders Index. The index tracks the performance of the 75 large cap U.S. stocks which displays the highest degree of positive investor sentiment and bullish insight based on content arranged from online sources including social media, news articles, blog posts and other alternative datasets.

No stock can have more than 3% of the index. It is rebalanced every month. The fund holds Ford Motor (3.66%), Draftsking (3.28%) and Facebook (3.20%) in the top three positions. It charges 75 bps in fees.  

Jamie Wise, CEO of Buzz Holdings and the originator of the index says, “the index uses natural language algorithms that examines whether the comment is positive, negative or neutral, then ranks each stock based on the degree of positive sentiment and breadth of discussion.”

How Does the Fund Fit in a Portfolio?

The year 2020 was upbeat for the stock market despite the coronavirus outbreak. Mammoth fiscal and monetary stimuli were held responsible such stock moves. However, this has flared up overvaluation concerns at the start of 2021. Moreover, growing vaccine distribution and a hefty fiscal stimulus under the Biden administration have boosted the interest rates, which is not a great situation for equities.

This may leave retail and unseasoned investors perplexed about future stock investing and compel them to look for cues on the trending stocks. Normally, unseasoned investors who do not have solid investment knowledge look for ideas of market experts. This is why keeping an ear to the ground for the buzz around stocks mentioned in social media attracts a great deal of attention. The fund BUZZ is thus of great use of investors.

Moreover, the fund relies on consistency and tries to discard one-time euphoria. “This is not a Reddit meme stock ETF,” said CEO of Buzz Holdings and the originator of the index. “This is about the broader conversation around stocks mentioned on social media platforms. We are using broad social media sources, principally Twitter and StockTwits.” Wise added that the fund also tracks Yahoo Finance, Benzinga and Reddit, as quoted on CNBC. But Wise went on to explain, “these are everyday stocks being promoted by people with a wide variety of viewpoints, and is not focused on a narrow group of Reddit names.”

Regular investors must be knowing that Gamestop (GME - Free Report) became super hot in late January on upbeat discussions on Reddit. In February, marijuana stocks enjoyed the same tailwind (read: Marijuana ETFs on a High on Reddit Frenzy).

Will It See Success?

Within a short time frame, the fund has become popular and amassed about $299.5 million in assets. The fund, in fact, does not have any such direct competition. The concept is quite new and so should make a killing in the coming days.

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