The fund's index methodology weights companies by a combination of market capitalization and momentum, but it does not use leverage or derivatives. This means the fund's returns closely track the underlying index minus fees. The expense ratio is 0.99%, which is higher than many broad-market ETFs but typical for niche thematic funds. The fund's tracking error has widened in recent years as the index's constituents have become more concentrated in a few large defense and energy names. This concentration increases volatility and makes the fund more sensitive to sector-specific news than a diversified index fund.
Why Tank ETF Lost Appeal in 2024
Several factors drove the Tank ETF's poor performance in 2024. Defense stocks, which had rallied strongly after the Russia-Ukraine conflict began in 2022, started to correct as investors reassessed geopolitical risks and government spending priorities. The U.S. defense budget grew modestly in fiscal year 2024, but the pace of growth slowed compared to prior years, and some major contracts faced delays or cancellations. Oil prices fell from highs above $100 per barrel in mid-2022 to below $75 per barrel in late 2024, hurting energy stocks and reducing the fund's exposure to commodity-driven gains. Small-cap value stocks, another core part of the index, underperformed as interest rates remained elevated and growth stocks continued to attract capital. For a broader view of energy market trends, see the U.S. Energy Information Administration's latest short-term energy outlook U.S. Energy Information Administration short-term energy outlook.
The fund's risk metrics also deteriorated in 2024. Its standard deviation increased, and its Sharpe ratio fell below 0.5, indicating that the fund took on more risk for less reward compared to the broader market. The fund's beta rose above 1.2, meaning it moved more sharply than the S&P 500 during market swings. These metrics suggest the Tank ETF is not a suitable core holding for most portfolios, especially for investors seeking stable, low-volatility exposure. The fund's drawdown in 2024 was steeper than the drawdowns seen in many broad-market ETFs, and its recovery has been slower. Investors who bought the fund during the 2022 hype cycle faced significant paper losses as the narrative around defense and energy stocks faded.
Is Tank ETF Worth Buying Now?
The Tank ETF is not a good fit for most long-term investors. Its concentrated sector exposure, high expense ratio, and poor recent performance make it a speculative holding rather than a core portfolio building block. Investors seeking broad exposure to defense or energy can use lower-cost ETFs that track larger, more diversified indexes. For example, the SPDR S&P 500 ETF Trust