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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): Performance chart of WisdomTree Cloud Computing UCITS ETF USD Acc

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.).
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    One important point for googlers here, the graph shows ONLY A FEW MONTHS. Literally only day traders worry about graphs that short. It would be nothing for it to plummet or skyrocket 50% from where it is at any point in the next few months. "Investing" really emphasizes long-term (decades), "trading" emphasizes very short term jiggles such as seen here.
    – Fattie
    Dec 18, 2020 at 17:02

2 Answers 2

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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.

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  • Completely random "gambing is tough" warning to the OP; as user R.J. mentions Adobe and PayPal are seeming stalwarts. However, in re gambling on Adobe, a gambler in that field recently pointed out to me that, WTH, all of Adobe's backbone product is now available .......... in a few lines of java on a web site, photopea.com. So, it's tough!
    – Fattie
    Dec 18, 2020 at 16:13
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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 )

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    Thanks for sharing your insights; much appreciated. I am not being conned, not just yet. I have been reading, and collecting information before I make any decision, and at the same time, being psychological confused about these scams. OK, confirmation bias, would stay from those. But how about ETFs in general? Are they all scams (from your answer, I feel that way)? Ones like Vanguard etc. (lower average return, not crazy lucrative, but stable), I presume?! If positive about funds, and how do you go about figuring out which funds are reliable/stable? Historical data? Company's reputation?
    – TwinPenguins
    Dec 18, 2020 at 16:29
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    It's so simple ...................... nothing beats index funds.
    – Fattie
    Dec 18, 2020 at 16:57
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    {So, to expand on that, "in the long term in all cases nothing beats index funds". You may believe you can make a trade. You may (for whatever reason) believe that "social media in asia" or "shale oil in europe" or "hospitals in south america" or "gold" or .. something .. will beat index funds, let's say for example "for the next 6 years". If you want to trade something (example, you believe "cloud computing will do well for the next 40 months") - then trade it, you're a trader then.}
    – Fattie
    Dec 18, 2020 at 17:00
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    Beg your pardon, "invest in an index fund" colloquially means "an index fund of the major markets" .. pretty much an S&P index. Sorry about that. (It's a really common thing on this site to say "nothing beats an ordinary index fund" (meaning a simple S&P index fund)
    – Fattie
    Dec 18, 2020 at 17:34
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    Your emboldened quote is so important. I can go to Jan 1 of any year, break up the market into 10 groups, given some criteria, and a year later, there will likely be some winning groups. Of course, if I only disclose the best 3-4, but 'cancel' the others, I look brilliant, or to be clear, a con artist. The fund family mentioned in the question started removing lagging funds a few years after launch. So one fund I happened to own, with a strategy 'for the long term' was cashed out in late December of that year, with no time to tax-plan the consequences. Good riddance.
    – JTP - Apologise to Monica ♦
    Dec 18, 2020 at 17:57

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