Yes, there is now a penny stock ETF. It is the Direxion Low Priced Stock ETF. For more details visit Direxion.
On July 22, 2021, Direxion launched LOPX a low-priced stock ETF. LOPX seeks investment results, before fees and expenses, of the Solactive Two Bucks Index. The Solactive Two Bucks Index tracks the performance of 50 U.S.-listed companies trading between $2 and $5 (penny stocks) at the time of selection. The companies will remain on the list unless their share prices decline below $1.25, or increase to over $10, at quarterly rebalance. Selection criteria include the following:
• A minimum average daily value traded of $1 million over 3 months.
• A market capitalization of at least $85 million.
• A closing price between $2.00 and $5.00 (August selection date), or a closing price between $1.25 and $10.00 (February, May, and November selection dates).
• Securities that have had a reverse stock split between the last and current selection day are not eligible for inclusion.
As you may know, penny stocks are considered volatile and often highly speculative investments. Their attraction lies in their potential to rise quickly in price. Risk takers are willing to risk their money on these cheap stocks in hopes of finding the next Amazon or Tesla. The problem is that their price can just as easily drop quickly. Some of them go bankrupt or dissolve into thin air, leaving their investors with nothing. Between the two extremes are some penny stock companies that are highly rated by analysts.
ETFs provide investors with a way to reduce risk through diversification. LOPX is an alternative to investing directly in penny stocks. Another way to invest in startups and small companies is to own microcap ETFs. Although it is currently very difficult to find penny stock ETFs, there is plenty of microcap ETFs.