It�s amazing how quickly Wall Street can throw together an exchange-traded fund.� This week, Global X launched the Social Media Index (NASDAQ:SOCL) ETF, which began trading Tuesday, although on very low volume.
That this ETF is coming from a company with �global� in its name is fitting: After all, the index would be sparse if it only comprised U.S.-based social media companies.� Only a handful of such operators have gone public over the past year, such as Groupon (Nasdaq:GRPN), Pandora (NYSE:P) and LinkedIn (NYSE:LNKD).
But more than one-third of the ETF�s portfolio includes Chinese based operators.� Some include Tencent Holdings and Sina (NASDAQ:SINA).
While social media is a global phenomenon, the Chinese market has seen several IPO disasters, such as Renren (Nasdaq:RENN).� A big reason has been intense competition, but there also have been questions about accounting.�
As other top social media companies come public � like Twitter, Zynga and Facebook � Global X will likely include them in the index.� But this will be done after the IPO.� In other words, investors of the ETF won�t get the first-day �pop.�
There seems to be little doubt that social media will continue to grow.� But is it really an asset class?� Probably not.� Besides, as seen with implosions of companies like MySpace, the risks are certainly great.
Social media should be a small part of a person�s portfolio as an opportunity to juice things up � but it should be done with lots of caution.
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