Trend ETFs are tempting, but they are risky for long-term assets. According to experts, hype, timing and different index selection make it speculative.
• Trend ETFs heavily dependent on the hype
• Timing crucial for success
• same topics, different results
Trend ETFs have been very popular for several years. Hardly a future topic for which there is not a suitable product: meat replacement, cannabis, robotics or smart cities. The funds bundle stocks that are supposed to map a certain trend and promise investors participate in the “topics of the future”. But as tempting as the concept sounds – trend ETFs could be unsuitable for long -term assets.
The timing problem with trend investments
A major risk is in the right timing. Investors not only have to recognize the right trend, but also make the optimal time for the start and later for the exit. “The classic timing problem is even clearer for most topics than in the classic stock system,” says an analysis of Stiftung Warentest. The example of meat replacement shows how difficult it is. Stiftung Warentest names the Beyond Meat share as an example: once started as a favorite, the title quickly lost value. The Davy Rize Sustainable Future of Food ETF, who relied on the same topic, could not convince. For long -term oriented investors, this dependence on moods and hypes is a serious risk, it is said.
In addition, many funds are only put on when a trend has already arrived in the market. Until then, the courses have often risen sharply, which reduces the chances of further price gains. A study by Ben-David et al. From Ohio State University, the Swiss Finance Institute and the University of Pennsylvania from 2022, showed that specialized ETFs in the first five years after edition of around 30 percent less sections than the broad market. This is due to the fact that the funds usually rely on highly rated shares if they become tradable at all. The business is still worthwhile for issuers, since trend ETFs demand higher fees compared to standard products.
Trend ETFS: same topics – completely different results
Another problem is the composition of the indices. Under the same trend term, funds can contain very different companies. On the subject of smart cities, for example, the Ishares Smart City Infrastructure ETF achieved an annual return of 11 percent in the past five years, while Amundi Smart Cities ETF only reached 3.7 percent. A similar picture shows itself with robotics: While the ISHARES Automation & Robotics ETF came to 10.8 percent annually, the L&G Robotics ETF only had 5.9 percent in the same period.
The problem with semiconductor ETFs becomes even clearer. While some providers such as Ishares or Vaneck limit the weighting of individual titles, the Amundi MSCI Semiconductors ETF according to Stiftung Warentest relies on an unkapped structure. As a result, Nvidia recently made up around 34 percent of the fund volume, it is said. This concentration led to a significantly better performance at short notice, but mounted considerable clumping risks if the dominant share loses value.
Experts recommend investors: trend ETFs only as an admixture
The examples show how big the differences between apparently comparable funds can be. Investors who believe that a trend ETF automatically map the right future market is often wrong. Theme funds are strongly dependent on hypes and require an active examination of the individual titles. According to experts, they are less suitable for long -term investors who rely on the proven strategy “buy and leave” lying down.
As an admixture for a broad depot, trend ETFs can be interesting, especially for investors who enjoy market observation and are willing to consciously take risks. For the basic system, however, experts still recommend a broadly scattered standard ETF like the MSCI World.
Bettina Schneider / Editor Finanzen.net