Politicians -- they're just like us! (Sort of.) They buy cars like we do and eat at restaurants like we do, and they often buy or sell stocks, too, just like we do. (On occasion, of course, they may be doing so with what some consider inside information, which would make their trading problematic.) But much of their trading is likely to be simply because they are bullish or bearish on various companies' prospects.
Some members of Congress have done quite well, too -- even notching triple-digit gains last year. If this all has you wondering just what they're buying and selling and whether you might invest similarly, you can. Here's how, and why you might not want to.
Image source: Getty Images.
Meet two new ETFs
For those who want to want to invest alongside members of Congress (and their spouses, notably), there are two relatively new exchange-traded funds (ETFs) to consider, based on data from Unusual Whales:
- Unusual Whales Subversive Democratic Trading ETF(NYSEMKT: NANC)
- Unusual Whales Subversive Republican Trading ETF(NYSEMKT: CRUZ)
Yes, their ticker symbols intentionally evoke Rep. Nancy Pelosi and Sen. Ted Cruz. The ETFs were launched fairly recently, in early 2023 -- so they don't have much of a track record.
Per the Stop Trading on Congressional Knowledge (STOCK) Act of 2012, members of Congress are required to file periodic transaction reports (PTRs) detailing their purchases, sales, or exchanges of most securities valued at more than $1,000. Spouses and dependent children are also often included in these requirements.
Comparing the two ETFs
The two ETFs use information from these reports to determine which securities to buy (or sell). Here are recent top holdings for each:
Democratic ETF top holdings | Weighting in ETF |
|---|---|
Nvidia | 13.1% |
Microsoft | 9.6% |
Amazon | 5% |
Alphabet Class C | 4.9% |
Apple | 4.8% |
Data source: Morningstar.com.
Republican ETF top holdings | Weighting in ETF |
|---|---|
JPMorgan Chase | 3.16% |
Nvidia | 2.76% |
Comfort Systems | 2.63% |
United Therapeutics | 1.9% |
Arista Networks | 1.8% |
Data source: Morningstar.com.
The Democratic ETF recently sported 718 holdings, versus 444 for the Republican one. The Democratic ETF was heavily weighted toward technology stocks, parking nearly 47% of its assets in the Magnificent Seven and others. (The next most represented sectors were consumer cyclicals and communication services.) Technology was also the top sector for the Republican ETF, but only with 23% of assets, followed by industrials, financial services, energy, and healthcare, each with more than 10%.
The Democratic ETF has been referred to as more of a growth-stock investment and the Republican one more of a value-oriented one. Another observation is that the former is focused more on information and ideas and the latter more on things.
How have these focuses served the ETFs? Well, remember that they don't really have track records long enough to draw conclusions from, but during the past year, the Democratic ETF has gained 34%, more than the Republican ETF's 21%.
Should you invest in these ETFs?
Given all that, and perhaps given your political leanings, should you invest in one or both of these ETFs? In my view, the answer is no -- not at all. Here's why:
- They're too young -- and small. The Democratic ETF recently had only $126 million in assets, versus $25 million for the Republican one. They're thinly traded, too, meaning that relatively few shares exchange hands each day -- so if and when you want to buy or sell, there will be relatively few investors to trade with and you may not get the best price.
- Their expense ratios (annual fees), while not astronomical at 0.76% (Democrat) and 0.83% (Republican), will still take meaningful bites out of your returns. Many index-based ETFs often charge 0.1% or much less.
- It's one thing to try to mimic the moves of great investors, but even if these politicians are great at legislating (and there's certainly little consensus on that), that doesn't mean they know which stocks will be long-term winners.
- Every investor has different needs, goals, and preferences. If you want to be a great long-term investor, staying invested in great companies for the long haul, you may end up in and out of lots of companies too frequently with this kind of investment.
The most compelling reason to avoid these ETFs, for me, is simply that there are much more enticing ETFs to consider, some of which have posted double-digit percentage gains for many years. Other ETFs have lower expense ratios, more promising investment strategies, and greater track records. For many of us, a simple broad-market ETF will serve us best.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Arista Networks, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Arista Networks, JPMorgan Chase, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
