Congressional Stock Trading May Soon Be Followed By These 2 New ETFs

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If you can’t beat them, join them seems to be the unofficial mantra of two new exchange-traded funds, or ETFs, recently filed as a way to track the transactions of members of the US Congress and their families.

Subversive Capital filed a Form N-1A on September 15 to establish two ETFs that will track exactly how Democratic and Republican members of Congress are trading. Subversive Capital works with Unusual Whales – a retail trading tool for individual stocks, options and crypto – for provide data for ETFs.

The Democrats’ tracking ticker will be called NANC, after House Speaker Nancy Pelosi, while the Republicans’ tracking ticker will be called KRUZ, after Sen. Ted Cruz.

Recently, the topic of members of Congress trading stocks has raised questions about the potential for insider trading and conflicts of interest, leading to the introduction of legislation that would prevent members of Congress from buying and sell individual stocks. Until this legislation is passed, however, you will soon be able to bury your own investment dollars to track their trades, passively, once the new ETFs are launched.

Here’s what you need to know about the political implications of congressional stock trading and the new ETFs being created to track it.

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The Rules of Congressional Stock Trading

According to Shares Actwhich was passed in 2012, members of Congress are required by law to file any stock transaction with the Securities and Exchange Commission within 45 days.

Unfortunately, this provides little value to ordinary Americans, as markets can change drastically between the time a member of Congress enacts an exchange and the time it becomes publicly available. The fines for breaking the rules are also negligible compared to the main profits of stock trading – only $200 for first-time offenders.

Over the past 10 years, members of Congress have come under intense scrutiny for using their positions of power for their own gain in a historic bull market – Jacobin, a popular left-leaning magazine, even called Rep. Pelosi a Wall Street Trader of the Year 2021.

While there are valid arguments for government officials to be involved in the markets, Andrew Lautz, director of federal policy at the National Taxpayers Unionargues that they should not be considered average participants for two reasons: because they have access to insider information and because their policy proposals and decisions have the ability to move those markets.

As a result, legislation is currently in the works to bar members of Congress from trading individual stocks, a move that has won bipartisan support. But for now, members of Congress can still buy and sell stocks as they please — and you can enjoy the potential profits, too.

Here’s how the new ETFs will work

Both ETFs, NANC and KRUZ, will have a simple goal: to help you track the trades of Democratic and Republican members of Congress and their spouses. Actively managed funds will track their transactions based on their public filings, which are required by the aforementioned STOCK law.

Because they are actively managed exchange-traded funds that require constant buying and selling, ETFs will charge investors a 1% management fee. It is quite expensive compared to passively managed funds such as Vanguard S&P 500 ETF, VOOwhich charges a fee of just 0.03% to participate.

Each ETF will have between 500 and 600 individual stocks at a time. According to an article by MarketWatchit looks like these funds will regularly shift their equity positions.

As of this writing, the launch date for the new ETFs has yet to be determined. It’s also unclear what will happen to the two new ETFs if Congress’ stock trading ban is eventually passed.

Learn more: What are ETFs and should you invest in them?

How to start investing

While the ethics of members of Congress who trade stocks are still the subject of debate, there are still a number of opportunities for ordinary investors to enter the market.

Keep in mind that while our elected leaders may want to take a chance when it comes to buying and selling individual stocks, it is nearly impossible to buy and sell stocks and beat proven indices such as the S&P 500 over time. In fact, even Warren Buffett, one of the greatest investors of all time, says the majority of investors should stick to buying index funds to drive long-term growth.

If you’re still interested in monitoring the stock market and day trading stocks, consider using the 90/10 strategy – in other words, keep 90% of your portfolio invested in index funds or stable growth ETFs. long term, and leave the remaining 10% to speculate. This way, in the worst case scenario, if you lost that 10% completely, you would still have 90% in place to grow in the long term.

Here are some of our favorite accounts to help get you started on your investing journey:

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    Fees may vary depending on the investment vehicle selected. Schwab a® The brokerage account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for 4,000+ mutual funds, and $0.65 fees by option contract

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At the end of the line

While there are many ethical and political issues to consider when it comes to investing, for now these two new ETFs would allow you to actively invest in the same way as our members of Congress.

Before embarking on your own investment journey, it’s important to check other things related to the goals you might want to accomplish, such as pay off high-interest debt or set aside money in an emergency fund – storing your money in a high-yield savings account would earn a higher return and offer a higher interest rate than a traditional savings account.

Once you take care of that, investing for the future can be a big step towards achieving more of your financial goals, like owning a home or saving for retirement.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff alone and have not been reviewed, endorsed or otherwise endorsed by any third party.

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