How to Invest in Unusual Whales Subversive Democratic Trading ETF (NANC) #NewsETFs

The Unusual Whales Subversive Democratic Trading ETF (NANC -1.2%) is an exchange-traded fund (ETF) that invests in stocks bought and sold by Democratic members of Congress and their spouses. Those who want to track the holdings of GOP Congress members and their spouses can do so through the Unusual Whales Subversive Republican Trading ETF (CROSS -0.14%).

Wondering whether the NANC 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.

Overview

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 2008-09 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’s success at picking stocks has raised eyebrows.

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 lawmakers are often privy to.

How to invest

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:

1. Open a brokerage account

Before you make your first trade, you’ll need to open and fund a brokerage account. Many of the top online stock brokers make it easy to open an account in just a few minutes. You’ll need to provide your name, address, date of birth, and Social Security number. Brokers are also required to ask for your employment information, net worth, and investment goals to comply with federal regulations.

2. Figure out your budget

Next, you’ll want to determine your budget for investing in the Unusual Whales Subversive Democratic ETF, as well as your overall investment budget. Usually, it’s recommended that you invest at least 15% of your pre-tax income for retirement, but if you can’t afford to invest that much, it’s OK to start smaller. Consider making a recurring investment each month in the securities you choose as part of a dollar-cost averaging strategy.

3. Do your research

Before you buy shares of the NANC ETF, compare its performance and fees against some of the best ETFs to buy. The NANC ETF has significantly higher fees than many top ETFs, so make sure you believe the investment strategy justifies the extra cost.

Also, look at any existing holdings in your portfolio and how much they overlap with your other investments. Some of the top stocks in the Unusual Whales Subversive Democratic Trading ETF are also included in many popular ETFs and mutual funds, so the fund may not provide much additional diversification.

4. Place an order

If you’re ready to invest in the Unusual Whales Subversive Democratic Trading ETF, enter the ticker “NANC” on your broker’s platform. You’ll need to indicate the number of shares you want to buy. If your brokerage offers fractional trading, you can enter the dollar value you want to invest instead.

You’ll also be asked if you want to place a market order or a limit order. A market order means the order will be placed right away at the current price, while a limit order will only be fulfilled at a price threshold you specify.

Once you’ve entered all the details, you’ll get a preview of your order. If everything is correct, go ahead and place your order.

Should I invest?

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 that 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.

ETF holdings

Holdings of the NANC ETF

The NANC ETF has between 150 to 200 holdings at any given time. The fund’s holdings lean heavily toward growth stocks, particularly those in the tech sector.

Altogether, the fund’s top 10 holdings accounted for about 50% of its value. As of Aug. 21, 2024, the fund’s top holdings were:

1. Nvidia (NVDA -3.59%)
2. Microsoft (MSFT -1.86%)
3. Amazon (AMZN -0.35%)
4. Alphabet (GOOG 0.96%)
5. Apple (AAPL -2.94%)
6. Salesforce (NASDAQ:CRM)
7. Costco Wholesale (COST -0.95%)
8. Eli Lilly (LLY -0.18%)
9. American Express (AXP -0.47%)
10. Philip Morris International (PM -0.49%)

Dividends

Does the Unusual Whales Subversive Democratic Trading ETF pay a dividend?

The Unusual Whales Subversive Democratic Trading ETF paid a $0.29 dividend in December 2023. Based on its current share price, that works out to a dividend yield of 0.80%. By comparison, the S&P 500 index — which is often used as a proxy for the U.S. stock market — has a dividend yield of about 1.3%, while some top dividend ETFs have yields around 2% to 3%.

Expense ratio

What is the NANC ETF’s expense ratio?

The NANC ETF’s expense ratio is 0.75%. That means if you made a $1,000 investment, $7.50 would go toward fees, while the remaining $992.50 of your money would be invested. Many of the most popular ETFs for long-term investors have expense ratios of 0.1% or lower, which translates to $1 or less in fees on a $1,000 investment.

A few extra dollars in fees may not sound like a big deal. But high expense ratios can eat away at your returns over time.

Imagine you invested $1,000 a month in two ETFs over 20 years. Each ETF delivers annual returns of 10%, but Fund A has a 0.1% expense ratio, while Fund B has a 0.75% expense ratio. Here’s how much you’d have after 20 years:

• Fund A: $722,064
• Fund B: $668,493

After 20 years, your returns for Fund A would be almost $54,000 higher solely due to the difference in fees. That’s not to say you should avoid ETFs with high expense ratios altogether. For example, some sector ETFs have higher expense ratios than ETFs that track the overall stock market. However, if you invest in a fund with a relatively high expense ratio, make sure its management and strategy justify the additional cost.

Historical performance

Historical performance of the NANC ETF

Because it was only launched 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 42% compared to less than 37% for the benchmark index.

Interestingly, the Unusual Whales Subversive Democratic Trading ETF has handily outperformed its Republican counterpart, which had returns of about 20% 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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