The Basics of Gaming, Gambling, and Leisure ETFs

What They Are, and How to Add Them to Your Investment Portfolio

People placing bets on a roulette table.
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For investors who want to add sectors within the entertainment industry to their investment portfolio, adding gaming, gambling, and leisure exchange-traded funds (ETFs) can be a smart choice. As with any investment security, especially sector funds that focus solely on one industry, investors should learn the basics before buying them. Here’s what to know about entertainment ETFs before investing. 

What Are Entertainment ETFs?

Entertainment ETFs may be gaming, gambling, or leisure ETFs, which are funds that invest in those respective industries. Although gaming, gambling, and leisure stocks may be categorized separately, they are typically grouped together as a sub-sector within the consumer discretionary, also known as consumer cyclical, stock sector. Gaming ETFs often invest in gambling casinos, such as Las Vegas Sands Corp (LVS). Newer versions also focus on the stock of companies capitalizing on the explosive growth in video gaming and eSports. Other types of gaming ETFs may invest in stocks of companies that manufacture video games, such as Nintendo (NTDOY).

Leisure ETFs may also invest in gaming stocks, but they typically invest in shares of companies in the travel and entertainment industry, such as United Airlines (UAL). 

For example, the VanEck Vectors Gaming ETF (BJK), which trades on the Nasdaq stock exchange, comprises many well-known global casino companies such as MGM Resorts International, Las Vegas Sands Corp., and Caesars Entertainment Corp. It seeks to replicate the price and yield performance of the MVIS Global Gaming Index, which tracks the overall performance of about 40 companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology, and gaming equipment.

Why Invest in Them?

Investors who buy gaming, gambling, and leisure ETFs are typically looking for exposure to stocks in these respective industries. Investors should keep in mind that ETFs like these may narrowly focus on a single sector of the economy, which makes them potentially riskier than investing in a broad market fund, such as an S&P 500 Index fund.

Because the gaming, gambling, and leisure industries are consumer discretionary stocks, they tend to perform best when the economy is strong. This is because discretionary spending on goods and services is not considered a necessity. This pattern is in opposition to the performance of consumer staples stocks, which represent goods and services such as food and personal care products that people use daily and are needed no matter how the economy is performing. They tend to be less sensitive to economic cycles.

For example, generally speaking, consumers may spend more money on travel and entertainment when the economy is strong. But they tend to spend less on these discretionary items when the economy is weak. Therefore, some investors may want to add a gaming, gambling, and leisure ETF to their portfolio if they expect the economy (and consumer spending) to grow or remain strong for the foreseeable future. Other investors may choose to invest in sectors like this for the long term.

Who Are Gaming, Gambling, and Leisure ETFs Right For?

Gaming, gambling, and leisure ETFs are stock-like investments, which means they can be appropriate for buy-and-hold investors looking for potential long-term growth of principal. Long-term investors typically have time horizons that are 10 years or more. This is because stock ETFs can experience periods of declining value and more time is needed to recover from these short-term losses.

Investors considering the purchase of gaming, gambling, and leisure ETFs should keep in mind that the market risk for sector funds like these tends to be higher than ETFs and mutual funds that invest in a broadly diversified market index, such as the S&P 500. 

How to Choose Gaming, Gambling, and Leisure ETFs

There are only a handful of ETFs that invest solely or mostly in stocks of companies in the gaming, gambling, and leisure industries. However, this small selection to choose from may actually make the research process easier.

This type of ETF may appeal to investors wishing to gain some exposure to the excitement of various forms of gaming and leisure activities without placing a bet directly at the table or window.

In general, as with any ETFs, there are a few key ideas to keep in mind before investing. Here’s what to consider when choosing a gaming, gambling, and leisure ETF:

  • Diversification: Does the ETF invest in a broad cross-section of gaming stocks, or does it concentrate its holdings in a narrow sub-sector, such as video games or eSports? You can look for the fund’s holdings list or look up the fund’s benchmark index to see which companies are included in the ETF.
  • Liquidity/AUM: Higher liquidity is generally better for investment pricing than lower liquidity. An ETF’s liquidity refers to how easy it is for investors to buy and sell it in the market. If an ETF is thinly traded, it may experience more volatility in price (more specifically, greater distance in the bid/ask spread). Generally speaking, the greater the assets under management (AUM), the greater the fund’s liquidity. Therefore, if you can’t easily find liquidity, you can look for a fund with a higher AUM than similar funds.
  • Performance: Past performance is no guarantee of future results, but it provides clues about how the ETF may perform in the future. Also, all other things being equal, an ETF with a longer performance history may be a better choice than one with a brief performance history.

Before investing, take the time to learn about various ETFs or mutual funds through research websites that are optimized with tools for comparing and analyzing funds.

The Bottom Line

ETFs may be a smart way to add concentrated exposure to a narrow sector, such as gaming, gambling, and leisure stocks. Sector funds like gaming ETFs can be wisely used if an investor is also allocating larger percentages of assets to a broad, diversified portfolio. For instance, an investor may choose to dedicate just 5-10% of their portfolio to these types of ETFs alongside larger holdings in more stable investment options, like conventional balanced stock and bond mutual funds.

However, investors should keep in mind that investing in narrowly focused sector funds generally entails higher market risk and more volatility (large price swings) than ETFs that invest in a broadly diversified index, such as the S&P 500.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. 

Article Sources

  1. VanEck. "BJK—VanEck Vectors Gaming ETF." Accessed Feb. 7, 2020.

  2. Fidelity. "Sector Investing Using the Business Cycle." Accessed Feb. 7, 2020.