Investors liked “story shares”. Now they like story ETFs.
A historical stock is not driven by earnings or assets, but by a simple and attractive narrative: a new dynamic boss, a dazzling technology or customers who go ga-ga for its products. A story ETF is a publicly traded fund that invests not in an entire market or in a single sector, but rather in a concept or trend.
You are probably better off buying a story ETF than a story stock; at least the fund is somewhat diversified. But story ETFs take their own risks.
Often referred to as thematic ETFs, these funds are distributed across sectors, trying to capitalize on ideas such as alternative energy, cloud computing or 3D printing. Others buy stocks that could be beneficial as more people work from home, demand gender or racial diversity, or generous money for pets.
The assets of these funds have grown by an average of 45% annually over the past three years, says William Baun of the Fuse Research Network in Needham, Mass.