Meme stocks are popular investments this year and one exchange-traded fund (ETF) that has been benefiting from that excitement is Roundhill Meme ETF (NYSE Arca:MEME). Up 63% this year, it has soundly outperformed the S&P 500, which is up around just 17%.
The meme-focused fund isn’t a terribly large one, aiming to hold 25 U.S. listed stocks, which “exhibit a combination of elevated social media activity and high short interest.” As of Aug. 3, the top three holdings in the fund included Nikola (NASDAQ:NKLA), Carvana (NYSE:CVNA), and Tilray Brands (NASDAQ:TLRY), each accounting for more than 4% of the fund’s total weight.
The danger with these stocks is while they can have lots of upside, they also carry a lot of risk. Last year, with investors turning away from growth stocks and risky investments, the Roundhill Meme ETF fell by 64%. Since its inception in late 2021, the fund’s value has declined by around 50%.
The fund has an expense ratio of 0.69% which isn’t terribly high given that it is actively managed and can frequently change.
The Roundhill Meme ETF can be a way to jump on the bandwagon and get exposure to the latest memes, but it may not be a suitable investment to hang on to for the long haul, where changing market conditions can quickly make it a bad buy. The fund comes with a lot of risk and it’s something you should consider before adding this ETF to your portfolio. Even though it’s more diverse than just holding a single investment, there’s still plenty of risk here.