Exchange-Traded Fund (ETF)
Wondering whether the Democratic ETF belongs in your portfolio -- or if investing like a congressperson will produce superior returns? We'll explain how to invest in the Unusual Whales Subversive Democratic Trading ETF, as well as some factors to consider before you put money into the fund.
What is the Unusual Whales Subversive Democratic Trading ETF?
Both the Unusual Whales Subversive Democratic Trading ETF and the Unusual Whales Subversive Republican Trading ETF are actively managed funds that were launched in February 2023 by Subversive Capital Advisers LLC. Under the Stop Trading on Congressional Knowledge Act, or STOCK Act, members of Congress and their spouses are required to disclose their holdings.
Former President Obama signed the bill into law in 2012 after lawmakers drew scrutiny for earning outsized returns on their trades during the 2008-2009 financial crisis. Despite the law's passage, members of Congress again came under fire for their high levels of trading activity in the earliest days of the COVID-19 pandemic, before most people knew of the severe threat to public health and the economy.
The Unusual Whales Subversive Democratic Trading ETF's ticker, NANC, is a reference to former Democratic House Speaker Nancy Pelosi, whose husband, Paul, raised eyebrows with his stock-picking success. At the time the funds launched, the company said in a press release that it was excited to make the funds available "so retail investors can invest alongside Congress and reduce information asymmetries."
One potential shortcoming, though, is that lawmakers have 30 to 45 days under the STOCK Act to file public disclosures. That relatively long window makes it less likely that retail investors can reap the benefit of the insider information that lawmakers are often privy to.
How to buy the NANC ETF
If you're interested in investing in ETFs like the NANC ETF or any publicly traded stock, follow these steps:
- Open your brokerage app: Log in to your brokerage account where you handle your investments.
- Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
- Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
- Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
- Submit your order: Confirm the details and submit your buy order.
- Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.
Should I invest in the Unusual Whales Subversive Democratic Trading ETF?
The Unusual Whales Subversive Democratic Trading ETF could be worth considering if:
- You believe members of Congress have access to privileged information that can help them beat the market.
- You think Democratic politicians have more investing savvy than Republicans.
- You believe an active management strategy can outperform passively managed investments over time, even after accounting for fees.
- You're comfortable with investing in riskier growth stocks.
You're probably better off skipping the Unusual Whales Subversive Democratic ETF if:
- You don't believe members of Congress are superior traders, even with their information advantage.
- You believe that a lack of real-time information erodes any potential edge that comes from knowing what lawmakers and their spouses are investing in.
- You're seeking investment income.
- You prefer low-cost passive investments over actively managed funds.
Benefits and risks of investing in the NANC ETF
Some potential advantages of investing in the Unusual Whales Subversive Democratic ETF include:
- Unique investment strategy. The fund's strategy of mimicking the trades of Democratic representatives in Congress is unique among ETFs and could help investors profit on information that elected officials are privy to.
- Strong historical performance. Since its inception, the NANC ETF has outperformed the S&P 500. Remember, though, that past performance doesn't guarantee future results. Also, academic research is mixed on whether members of Congress actually outperform the market over time.
- Access to a diversified portfolio. The Unusual Whales Subversive Democratic ETF has more than 150 holdings, offering an easy way to diversify your portfolio.
Consider these risks before investing in the Unusual Whales Subversive Democratic ETF:
- Potentially duplicative of your current portfolio. While the Subversive Democratic ETF is pretty well diversified, you'll find its largest holdings in S&P 500 index funds and other ETFs and mutual funds that many investors already own.
- Lack of real-time information. Members of Congress have 30 days to disclose their stock trades. The fund uses these disclosures in its portfolio selection, so investors may not get much of an edge due to the lack of real-time information.
- High fees. The ETF's expense ratio is fairly high at 0.75%, which can eat away at your returns in the long term. By comparison, many top ETFs have expense ratios of 0.1% or lower.
Expense Ratio
Historical performance of the Unusual Whales Subversive Democratic Trading ETF
Because it was launched recently in February 2023, there's not much historical data we can use to assess its performance. Since the fund's inception, it's outperformed the S&P 500 with total returns of around 67% compared to roughly 55% for the benchmark index.
Interestingly, the Unusual Whales Subversive Democratic Trading ETF has handily outperformed its Republican counterpart, which had returns of about 37% during the same period. However, it's important not to read too much into short-term results when you evaluate an investment. Most actively managed funds underperform passively managed funds in the long term due to frequent trading and higher costs.
Related investing topics
The bottom line on the Unusual Whales Subversive Democratic Trading ETF
The premise behind the Unusual Whales Subversive Democratic Trading ETF is certainly interesting -- but you can't quite say the same about the fund's top holdings. All 10 of the fund's largest holdings are included in the S&P 500 index, which means there's significant overlap with a typical investor's portfolio.
You're unlikely to gain significant exposure to any new companies through the fund, and any edge you can gain from knowing how members of Congress are trading is dulled by the lack of real-time information. Given the fund's relatively high expense ratio, make sure you have a solid investment thesis before you put money into the ETF.
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