HoldingsGMO Internet, Digital Garage, Taiwan Semiconductor Manufacturing Company.
Managed byAmplify Investments
“Blockchain” and “cryptocurrency” weren’t even a part of the American lexicon a decade ago. But today, they’re quickly becoming popular and important elements of our financial system.
Blockchain is a global, online database distributed across networks of computers. It stores encrypted information in decentralized and distributed “blocks,” making it extremely difficult to alter or modify.
While the idea of a cryptocurrency–or digital money–is still perplexing to many people, cryptocurrencies still have real-world value. And blockchain, the technology that allows for cryptocurrency transactions and much more, is primed to become a central component of our financial system.
While the concept is still perplexing to many people, blockchain is proving its salt as a viable and valuable platform.
Now you can get in on the action and invest in companies developing or utilizing blockchain technology with the Amplify Transformational Data Sharing ETF, (ticker: BLOK), an exchange-traded fund on Stash.
What’s in the fund?
BLOK has 52 total holdings and does not follow an index. The largest of the holdings are Digital Garage, Square, GMO Internet, and Taiwan Semiconductor Manufacturing Company.
There are also bigger, more well-known companies in the fund, all of which are working with blockchain technology. Examples include NVIDIA, IBM, Intel, and even Overstock.com.
Most of the fund’s holdings are located in North America (59.2%), with 27.9% in Asia, and the remaining 11.3% in Europe. As for industry allocation, more than a quarter (26.4%) of the fund’s holdings are internet stocks, with a further 16.8% in the semiconductor industry, and 14.9% in software.
BLOK launched in January 2018, and is managed by Amplify ETFs.
Since the fund is only a few months old, there isn’t much performance data. But according to Stash’s internal calculations (using data from Xignite), the fund’s return, year-to-date as of May 2018, is -2.9%.
Are there similar funds?
Though BLOK and blockchain technology are new, BLOK has competition from at least three other funds. One example is the Reality Shares Nasdaq NexGen Economy ETF (ticker: BLCN), which has the same aim as BLOK–to give investors exposure to blockchain technologies.
BLCN has 65 holdings, and also launched, in January 2018. The fund’s biggest holdings include Intel, Microsoft, Cisco, IBM, and Nasdaq, the company that runs the world’s second-largest stock exchange. Its first-quarter return, as of March 31, 2018, is -0.96%, according to Morningstar.
Other blockchain funds include the Innovation Shares NextGen Protocol ETF (ticker: KOIN) and the First Trust Indxx Innovative Transaction & Process ETF (ticker: LEGR). Both also launched within the past 5 months.
Risks and considerations
While all funds contain some element of risk, BLOK is unique in that it’s centered around a new, evolving technology. Blockchain is still being developed, and is largely untested, unknown, and misunderstood by the many people.
The fund’s prospectus prominently features a warning to would-be investors that “the technology is new and many of its uses may be untested.” This, specifically, refers to the fact that blockchain is still in its infancy, and has yet to be fully fleshed out.
There are other unique risks associated with the fund, and with blockchain more broadly. The fund’s prospectus says that there’s a chance of “theft, loss or destruction” when it comes to the cryptographic keys required to access user accounts on blockchain platforms, which can “impair value.”
Likewise, the entire platform is dependent on the internet, and uninterrupted service and access to it. If a widespread outage were to occur, blockchain companies would suffer tremendously.
BLOK’s other risks include cybersecurity breaches, a lack of regulation, and the emergence of competing platforms and technologies, according to the prospectus.
BLOK’s expense ratio is 0.7%, which is higher than average of 0.23% according to industry data.
- BLOK allows investors to invest in companies working with and around blockchain technology
- The fund contains stocks from companies such as NVIDIA, IBM, and Square
- Though blockchain is new and trendy, it’s still largely unproven