Being a bandwagon fan is often frowned upon in the sports world. Being a longtime supporter is something to be proud of, and is a natural derivative of our love for loyalty and trust. We don’t like when others join in only when it seems like it’s a team’s time to shine, and understandably so.
Finance is no different, and you’ve seen a lot of this traditionalist mindset come out of the woodwork this year when skeptics heap dissent on the naive newbies who intend to send AMC Theatres to the moon on no fundamental basis and just hoping for a short squeeze. This is the definition of trends investing, and as stupid as it sounds in some cases, it can be a very lucrative strategy.
A thoughtful whim: trend investing can be logical
Investing in trends is not just limited to going on Reddit to commiserate with your fellow apes and discuss the diamond hands you have for $GME. Trends extend to many other viable investments too. Emerging markets, value investing, green energy, EV transport, aerospace tech, 3D printing, aging demographics—we could go on. These are all viable investment strategies that also happen to play a quantifiable role in the future of our economy.
Jumping into emerging trends is not always a sign of naiveness and gullibility, but can actually be indicative of a sense of opportunity. Trend investing is establishing itself as a valid strategy, and this is being solidified by the fact that entire funds are being curated just to capture certain up-and-coming markets and industries.
Trends formalized: ETFs, but a little less boring
Amplify Investments, whose ETF arm specializes in creating various funds and currently manages over $4.7 billion in capital between them all, intends to capitalize off of this movement by creating the epitome of a trends ETF, launching their new “Thematic All-Stars ETF” at some point this year.
The index will consist of 160 stocks, with no one allocation exceeding 5% of the total portfolio. The fund will focus on getting to the core of trending industries such as fintech, health care innovation, sustainability, disruptive technology, and more, attempting to capture all trends in one and distill the waters.
Amplify isn’t alone
Prior to this, 2021 has already welcomed the filing of an ETF literally given the name FOMO, which seeks to offer investors wide access to asset prices that were pushed higher through the fear of missing out. When it launches, it will invest in social media, hedge funds, SPACs, ETFs, stocks, and more. Van Eck also launched the social sentiment ETF, called $BUZZ which attempts to track stocks that are receiving the most positive social media limelight.
All of these examples come to us without even mentioning Ark Invest’s plethora of innovation-oriented indexes such as $ARKK, $ARKQ, $ARKX, and others that have grown to become some of the world's most popular investment strategies.
So, maybe give trends a chance
All that being said, trends aren’t something to be written off completely solely on the basis of their novelty to the world or their unfounded basis. There is the value of a company, and then there is the stock market. They often operate as independent entities, with one being based on numbers, and the other reliant on social proof and feelings.
Feelings make money too.