The S&P 500 can be a great place to invest in for the long haul. But if you want a way to diversify outside of that and hold some new stocks that can be hot buys in the short term, you may want to consider the Renaissance IPO ETF (NYSE Arca: IPO).
As the ticker symbol and name suggest, this is an exchange-traded fund (ETF) that invests in new issues. According to its website, it says that there is no overlap with the S&P 500 at all and that it only holds new stocks; the average age of a holding in the ETF is just 1.3 years.
And there are plenty of big-name stocks in the fund, including Airbnb (NASDAQ:ABNB), Snowflake (NYSE:SNOW), and Palantir Technologies (NYSE:PLTR). Collectively, they make up around 26% of the ETF's total weight.
More than 70% of the fund's holdings are in large cap stocks. And the technology sector accounts for more than half of the stocks in this ETF.
With growth stocks being hot buys this year, it may come as little surprise that this ETF has been beating the market. Up 34% year to date, its returns are close to double what the S&P 500 has generated thus far (it's up around 18%). When looking at a broader range of five years, however, the picture is much different: the S&P is up 56% but the IPO-focused fund is only up by 7%.
There can be some excitement with this fund but it also comes with risk and uncertainty. It also isn't cheap with an expense ratio of 0.60%. This can be a good investment to hang on to when the economy is doing well and investors are bullish, but it may not be ideal to hold for the long term.
