And even monitoring social media like Twitter has produced market-moving moments, such as in 2013 when a fake Associated Press tweet about explosions in the White House and President Obama being injured trigged the Dow to lose 100 points in two minutes, before bouncing back to the pre-tweet level just three minutes later.
But reliability is a consideration, and following hedge fund public filings is following moves made months ago that may no longer be current at the time of the 13F filing’s release. And the folly of making market moves based on tweets was clearly evident with the fake AP tweet.
Broadest Crowdsourcing Sentiment
If the idea behind crowdsourcing ETFs is merely trying to understand what everybody's doing, what everybody's buying and the right price for that, then there's nothing better than a market index like the S&P 500. The popular benchmark offers the broadest possible scope with the most information.
A fund based on the index, like the SPDR S&P 500 ETF Trust (SPY), the Vanguard S&P 500 Index Fund (VOO) or what is now the cheapest of the three when it comes to expense ratios at a barely registering 0.04%, the iShares Core S&P 500 ETF (IVV), are the best securities to access the best crowdsourcing tools when it comes to capturing stock sentiment. Performance has borne that out.
Chart courtesy of StockCharts.com
Newer ETFs have been moving away from the broad market for years, as the alpha-seekers purport all kind of ways to beat that boring old beta, and some of those funds certainly have accomplished that.
But when it comes to measuring broad sentiment and profiting from that, it is tough to beat the S&P 500.
At the time of writing, the author had no positions in the securities mentioned. Drew Voros can be reached at [email protected].