The past decade has seen the rapid growth of exchange-traded funds as alternative investments to equities and fixed income instruments. But in the shadow of the massive growth in ETF investing has been a backlash of sorts, due to negative returns from products that represent a dizzying array of asset classes and niche strategies.
I’ve heard more than one financial analyst beg the question, “Does the market need yet another ETF?”
The only rational answer is yes, absolutely. Because financial markets are, by nature, dynamic and often volatile. To profit in such a changeable environment, investors need financial instruments that reflect market and societal changes, as well as innovations in business technology.
Which is why we created the Buzz Social Media Insights Index – a simple investment vehicle that gives you exposure to the top 75 U.S. stocks based on an emerging sentiment factor: social media.
Harnessing the power of social media
Buzz Indexes has created the world’s first ETF based on investment insights derived from the social media collective. Our aim is to provide retail investors with access to a factor-based, Big Data-crunching strategy that, until now, only the largest global players could employ for a trading edge.
Think about the power of social media. As individuals we live a substantial portion of our lives in these digital spaces. We rely on group opinions gleaned from social media to validate everything from the ideal vacation getaway to the best Sunday brunch spot.
When a person shares their impression of a company or brand on social media, they’re intentionally broadcasting their feelings to get a response. Maybe they want feedback, or to acquire followers by capturing attention. And unless they’re being sarcastic, they’re probably being truthful.
These individual impressions become amplified across social networks (reposts) and aggregated with others’ impressions to create, well, buzz about that company or brand and the value of its products or services.
A breakthrough in measuring sentiment
It’s obvious that social media has disrupted the entertainment, retail, food and beverage, and travel industries. Buzz Indexes is proof that it’s finally shaking up the financial industry as a factor in measuring investor sentiment.
Such sentiment has historically been tricky to measure. In the past, we relied on contrived methods like surveys and polls to judge sentiment.
Social media’s Big Data contains the collective wisdom of millions of people. And now we have the technology to measure these independent, unsolicited viewpoints shared spontaneously, moment by moment. Filtering these many voices for nuggets of truth is far more powerful than the loudly voiced opinions of a CNBC analyst.
Inside the Buzz Indexes portfolio
Every month, more than 50 million unique data points about U.S. stocks are analyzed from comments, news articles, tweets, and blog posts shared on social media platforms.
Our analytics models parse this massive aggregation of social media “Big Data” to uncover insights and investor sentiment predictive of stock market returns. It’s a four-step process that repeats itself to rebalance the portfolio each month:
- Sift raw data to filter out a list of the most-mentioned U.S. stocks across the social media landscape.
- Analyze the collective tone of conversation about these stocks – positive, negative, or neutral?
- Pinpoint influencers whose tweets and posts shape collective opinion about stocks and investing. Among that group, we identify and rank those who’ve been the most accurate in their market predictions.
- Each “buzz-worthy” stock is given an insight score (based on our proprietary analytics), which also incorporates brand value perceptions. The 75 most “bullish” stocks each month are included in the Buzz Index.