If you can’t beat ‘em, join ’em seems to be the unofficial mantra of two new exchange-traded funds, or ETFs , recently filed as a way to track the trading of U.S. Congressional members and their families.
Subversive Capital filed a Form N-1A on Sept. 15 to establish two ETFs that will follow exactly how Democrat and Republican members of Congress are trading. Subversive Capital is working with Unusual Whales — a retail trading tool for individual stocks, options and crypto — to provide data for the ETFs.
The Democrat-tracking ticker will be named NANC, after Speaker of the House Nancy Pelosi, while the Republican-tracking ticker will be called KRUZ, after Sen. Ted Cruz.
Recently, the subject of congressional members trading stocks has raised questions regarding the potential for insider trading and conflicts of interest, leading to the introduction of legislation that would restrict those in Congress from being able to buy and sell individual stocks . Until that legislation is passed, though, you will soon be able to bury your own investment dollars into following their trades, passively, once the new ETFs are released.
Here’s what you need to know about the political implications of Congressional stock trading and the new ETFs that are being created to track it.
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Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly. Sign-up here . The rules of Congressional stock trading
According to the STOCK Act , which was passed in 2012, members of Congress are required by law to file any stock trades with the Securities and Exchange Commission within 45 days.
Unfortunately, this provides little value to everyday Americans since the markets can change drastically from the time when a member of Congress enacts a trade to when it becomes publicly available. The fines for not abiding by the rules are also negligible compared to the major stock-trading profits being made — just $200 for first-time offenders.
Over the last 10 years, members of Congress have received major scrutiny for using their positions of power for their own profit during a historic bull market — Jacobin, a popular left-leaning magazine, even labeled Rep. Pelosi as the 2021 Wall Street Trader of the Year .
As much as there are valid points being made for government officials to be involved in the markets, Andrew Lautz, director of federal policy at the National Taxpayers Union , argues that they shouldn’t be considered average participants for two reasons — because they have access to privileged information, and because their policy proposals and decisions have the ability to move such markets.
As a result, legislation is currently in the works to ban members of Congress from trading individual stocks , a move that has gained bipartisan support. But for now, those in Congress can still buy and sell stocks at their pleasure — and it’s possible for you to get in on the potential profits as well. Here’s how the new ETFs will work
Both ETFs, NANC and KRUZ, will have one simple objective — to help you follow the trades of both Democrat and Republican members of Congress and their spouses. The actively managed funds will track their trades based on their public filings, which are required by the aforementioned STOCK Act.
Because these are actively managed exchange-traded funds that require constant buying and selling, the ETFs will charge investors a 1% management fee. That’s quite pricey compared to passively managed funds such as the Vanguard S&P 500 ETF, VOO , which charges a fee of just 0.03% to participate.
Each ETF will have between 500 to 600 individual stocks at a time. With lawmakers and their family members racking up an estimated $355 million worth of stock trades in 2021, according to an article by MarketWatch , it appears these funds will be regularly shifting their stock positions.
As of this writing, a launch date for the new ETFs has yet to be determined. It’s also unclear what will happen to the two new ETFs if the congressional stock trading ban does eventually pass.
Learn more: What are ETFs and should you invest in them? How you can get started investing
While the ethics of members of Congress trading stocks is still up for debate, there are always a number of opportunities for everyday investors to enter the market.
Keep in mind that while our elected leaders may want to take their chances when it comes to buying and selling individual stocks, it’s nearly impossible to effectively buy and sell stocks and beat […]
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