WisdomTree ETFs

Question

I have come across WisdomTree. I am quoting, as they define their line of work:

WisdomTree is an ETF sponsor and index developer that uses a rules-based methodology to select and weight companies...

They are quite active and fast growing as it appears. Some of their funds look rather quite seductive, i.e. lucrative, so that it is more like too good to be true. For example, WisdomTree Cloud Computing UCITS ETF USD Acc (Inception/ Listing Date: 3 September 2019) or WisdomTree Artificial Intelligence UCITS ETF USD Acc (I think it follows Nasdaq CTA Artificial Intelligence & Robotics, but not sure), has had a Y-t-Y return of nearly 90% and 60%, respectively.

Performance of WisdomTree Cloud Computing UCITS ETF USD Acc (Year-to-Year):

I understand it is highly volatile (could collapse in a month or so). I am also afraid they some of these funds may disappear or reach to a plateau very early, and won't be as lucrative as they seem now. But even dropping to an average yearly growth 10-20% over a 5-Year or 10-Year period would be still pretty good, right? (again sounds too good to be true)

Questions:

• Q1: Had anyone here been with WisdomTree group? Are they reputable? Any word of cautions? What do I miss? Obviously, it is only been running for a year, and it is not known how it may turn out in the coming years. But Cloud Computing is just starting, and hard to believe it will go away, at least, soon!!
• Q2: In general, what happens if a fund fails or disappears? Would be like a company failing with an individual stock, meaning one loses all the money?
• Q3: Also I have found funds (not at WisdomTree) that historically return over 15% average growth over the last 5-10 years. This is a bit puzzling. I am reading the book 'The Simple Path to Wealth' by JL Collins (half-through, I kind of like it), where he shows that for example Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) has had an average return of 8-12% over a long course (10Y or 20Y etc.), some years falls, some years catch up and go beyond, but historically averages at about that. Well, if you look at the last 10-Y (VTSAX Chart in Percentage from 2001- 2020), it had an accumulated growth of 208%, almost matches the claimed average of 8-12%!! There are apparently other funds outperforming though. Does that mean they are much better funds than Vanguard ones out there? I know it may sound like comparing company X or Y (nobody knows beforehand). Still checking. I have to admit that I haven't also compared the whole picture (expense ratio, dividend etc.).

Answer 1

WisdomTree itself isn't Too Good To Be True. The ETFs you mention (Cloud Computing and Artificial Intelligence) are real, and they comprise real companies, but they are "just" highly volatile.

For example, the Cloud Computing ETF tracks the BVP Nasdaq Emerging Cloud Index. Some of those companies (like Adobe and Paypal) are solid, but others are highly speculative, with zero or minimal profit and a P/E ratio in the clouds.

So invest some of your discretionary investment money in them, with the understanding that you might lose a lot.

Answer 2

You are being completely conned.

You're just seeing confirmation bias.

(Explanation: https://money.stackexchange.com/a/127868/41786 )

The way the fund industry works is one of the world's simplest large-scale scams:

An entity launches a few dozen funds. One gets good results for a year or two. They run ads - such as the OP has seen here - for that one. They then make lots of money.

There's no more to it than that.

Your three questions,

1 - a simple scam, like all funds

2 - your money is gone

3 - about 12 times a week on this site (I counted!) someone discovers confirmation bias. Fully explained here: https://money.stackexchange.com/a/127868/41786

(It such a common topic on here there there are now many answers which just mention other answers which mention explanations of confirmation bias! https://money.stackexchange.com/a/133794/41786 )