This ETF nearly doubled returns in 2023. Good time to invest?

Standing out in an already exceptional team is rare. But just like Lionel Messi outshone his illustrious teammates in Pep Guardiola's magical Barcelona, Mirae Asset's international ETF did something similar last year as most things turned to gold in the equity market.

Numerically speaking, the Mirae Asset NYSE FANG+ ETF delivered an astounding 96 per cent returns in 2023. That's almost doubling your money in just 12 months.

What makes it special?
It is an ETF (exchange-traded fund) that tracks the NYSE FANG+, a US-based index comprising just 10 companies.

Of them, seven are part of the so-called Magnificent Seven, a select group of companies consisting of Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia and Tesla. As such, they all had a rollicking 2023.

The craze around Mirae Asset NYSE FANG+
Given the exceptional performance in 2023, it isn't surprising that Mirae Asset NYSE FANG+ ETF is high on investor interest.

For starters, it invests in companies that are at the cutting edge of innovation. Second, they offer international diversification, a recommended strategy for most investors.

Third, and most importantly, this ETF is the most worthwhile of the four domestically tradable ETFs that can help you ride the Magnificent Seven gravy train at this point. (The only other route is through FoFs (fund of funds) that invest in overseas ETFs. However, they have stopped accepting investor money since April 1, as they recently crossed the $1 billion limit.)

The price for fame
Since options to invest overseas are currently threadbare, investors are flocking to the best alternative.

As a result, the Mirae Asset NYSE FANG+ is trading close to Rs 96, which is a staggering 17 per cent higher than its NAV of Rs 82 (as of April 5, 2024). A classic case of high demand and limited supply.

It's not that the Mirae Asset NYSE FANG+ ETF hasn't traded at a premium in the past. But a premium of 17 per cent is unprecedented.

Should you invest?
No.

Why?
You'll need the underlying stocks to appreciate collectively by 17 per cent before you'd even break even.

Moreover, sooner or later, the ETF will return to trading close to its NAV and you'll be stuck with subpar returns.

Even if you are willing to hold for a decade, you'd end up earning 1-2 per cent less returns.

In short, the riskiest thing you can do right now is to get greedy and buy the Mirae Asset ETF at such a high premium.