Mimicking Congress: The strange world of political stock funds
It’s no secret that the entire Congress, regardless of political affiliation, has assets and investment opportunities to grow their long-term wealth. Now you have a chance to emulate them.
do not miss it:
There are two new exchange-traded funds (ETFs) that mimic the trading patterns of U.S. members of Congress. You can invest in:
The Unusual Whales Subversive Democratic Trading ETF (ticker: NANC) is an ETF named after Nancy Pelosi and based on the trading of Democratic lawmakers.
The Unusual Whales Subversive Republican Trading ETF (ticker: KRUZ) is based on the trading of Republican lawmakers and is named after Ted Cruz.
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The Nancy Pelosi ETF (NANC) was launched on February 10, 2023. The ETF’s all-time high return is 44.43%, up $10.97 from its initial investment of $24.69. The NANC fund has performed well, but what if you had invested $20 per week in Nancy Pelosi’s portfolio for the past five years? You would have invested $5,220 over five years and earned $8,326 today, a 1.6x return. Over the same period, the SPY ETF has earned less, currently $8,130.
The KRUZ ETF, which was also launched on February 10, 2023, is up 21.74% from $24.96 per share at launch to $30.39 per share. If you invested $1,000 on February 10, 2023, it would be worth $1,217.40 today.
What is the difference between the two fund positions?
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On NPR’s show “The Indicator from Planet Money,” hosts Darian Woods and Wei-Lin Wong decided to put this to the test. As an experiment, the hosts invested $77.35 in these ETFs and flipped a coin to decide who would invest in which funds.
As of July 28, 2024:
If the hosts had invested from January 1st, NANC investors would have made $14.07 and KRUZ investors would have made $8.05 — hardly life-changing numbers.
The story continues
Before you buy, consider the ethics of politicians buying and selling stocks. Some advocates have called for a ban on congressional stock trading. In fact, a proposed bill called the ETHICS Act aims to address this issue. However, one study shows that congressional trades do not systematically outperform the market. In fact, almost absurdly, a reindeer stock-picking experiment outperformed congressional trades, highlighting the inherent risk in any investment.
Should you invest in either of these funds? Individual investors can benefit from the broad diversification of both funds. However, investing in either fund does not directly support either political party, and investors should not choose a fund based on political affiliation in order to benefit financially.
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This article, “Mimicking Congress: The Strange World of Political Stock Picking Funds,” originally appeared on Benzinga.com.
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