Key Points
Investing in memory stocks has produced fantastic returns for investors this year.
A relatively new exchange-traded fund (ETF) has launched, focusing on the top memory stocks.
The Roundhill Memory ETF has already more than doubled in value.
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Demand for memory has been rising, and that's a key reason a stock such as Micron Technology has surged nearly 800% in just the past 12 months. As companies have invested in artificial intelligence (AI), demand for tech infrastructure and memory has increased dramatically. Companies such as Micron have not only benefited from rising product sales but also been able to raise prices, resulting in terrific growth on their top and bottom lines.
Memory stocks have gotten expensive, however. And there are also many different ones to choose from. If you aren't sure which ones to invest in and don't want to put all your money into just one promising growth stock, a good alternative may be to consider a relatively new exchange-traded fund: the Roundhill Memory ETF (NYSEMKT: DRAM).
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The DRAM ETF is already up 125% this year
Although the ETF only launched in April, due to the incredible demand around memory stocks, it has already generated terrific returns for early investors, as it has soared 125% thus far. A big reason why is that its top holding is currently Micron Technology, closely followed by South Korean semiconductor giant SK Hynix. Together, those two stocks account for just over half of the fund's holdings. Other recognizable names in the ETF include Samsung Electronics, Sandisk, and Western Digital.
The fund isn't terribly large, as it contains just 15 holdings due to its focus on memory stocks. It also has an active management style, and so its fees aren't terribly low; DRAM's expense ratio is 0.65%. But given its early returns, investors may be willing to look past that. Roundhill is bullish on the growing demand for memory and sees it as part of a growth story playing out in tech that spans not just a couple of years but multiple decades.
Memory stocks are hot, but they can make for risky investments
If you're bullish on tech and believe memory products will continue to rise in demand for several years, then investing in the DRAM ETF may be an excellent move.
But there is also reason to exercise some caution here, because stocks such as Micron are trading at high valuations based on the expectation that demand will remain through the roof for the foreseeable future. Any disruption to that growth story could result in a massive decline. Investing in these types of stocks isn't for everyone, and you'll need a high risk tolerance and a willingness to hang on for the long term.
Should you buy stock in Roundhill ETF Trust - Roundhill Memory ETF right now?
Before you buy stock in Roundhill ETF Trust - Roundhill Memory ETF, consider this:
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Western Digital. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
