Investors piled a record $900 billion into ETFs this year — nearly double what they invested in all of 2020. What are they so eager to buy?
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Massive flows into ETFs reveal where investors think the most money is to be made. They’re looking for low-cost ways to stay in the broad market as it continues its multiyear march higher. But they’re also looking to play it safe a bit, too, by scooping up some of the assets that haven’t rallied as much.
“The record setting year of the ETF keeps getting stronger. U.S.-listed ETFs gathered $900 billion of new money with two weeks of trading left in the year, continuing to obliterate the prior record of $504 billion set in 2020,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.
Biggest Flows Show Exposure To S&P 500 Is Key
What do you do when you’re not sure which stocks will do best in 2022? Own more of them.
The year’s biggest target of investors’ deluge cash is telling. Three of the top five lures of money are ETFs tracking the big-cap S&P 500. But it’s more than just that.
The Vanguard Total Stock Market ETF (VTI) hauled in $43 billion in assets this year, more than any other ETF, Rosenbluth says. And that shows investors are looking for simplicity and broad diversification — even beyond what you get from the S&P 500.
The Vanguard Total Stock Market ETF even took in 30% more money this year than the world’s largest ETF: SPDR S&P 500 ETF Trust (SPY). The SPDR S&P 500 ETF holds $448 billion in assets. But it’s focused on just 500 U.S. large cap companies, which has ruled markets for years.
By putting so much in Vanguard Total Stock Market, investors show they want one stock that exposes them to all corners of the market. The Vanguard Total Stock Market owns more than 4,000 stocks including small and microcaps. The average market value of its holdings is $507.9 billion, says ETF.com. That’s nearly 20% smaller than of the SPDR S&P 500 ETF Trust.
Going For Value And Technology
Investors, though, are still picking strategic bets. Value-priced stocks and giant technology plays are hauling in big money, too.
Looking to scoop up big-caps left out of the growth-focused rally of years past, investors poured more than $14 billion into the Vanguard Value ETF (VTV). It’s largely populated with financials, health care and energy plays that have gotten trampled by big-cap technology for years. The ETF’s top holding is Warren Buffett’s Berkshire Hathaway (BRKB) at nearly 3% of the portfolio. Financials are the top holding at more than 20% of the portfolio.
Investors, too, are looking to turn a profit on areas of the market left out of the year’s rally. More than $13 billion flowed into the iShares Core MSCI EAFE ETF (IEFA) The ETF owns companies in developed nations outside the U.S., which rose less than 10% this year. Additionally, $10.4 billion moved into the Vanguard FTSE Emerging Markets ETF (VWO), which fell 3% this year.
But they’re not turning their backs on big-cap technology. The tech heavy Invesco QQQ Trust (QQQ), which owns the 100 largest stocks on the Nasdaq like Apple (AAPL), pulled in nearly $16 billion.
Playing It Safe, Too
It’s not just swings for the fences, though, with ETFs. Six of 20 ETFs to haul in the most money this year are bond funds. None of them performed particularly well in 2021. But their popularity shows investors are still looking for yield and stability.
The Vanguard Total Bond Market ETF (BND) further pulled ahead as the world’s largest bond ETF. It pulled in nearly $18 billion this year.
Most Popular ETFs In 2021
Pulled in most net inflows
| ETF | Symbol | Net flows ($ billions) | Net assets ($ billions) | Price YTD % ch. |
|---|---|---|---|---|
| Vanguard Total Stock Market | (VTI) | $43.1 | $294.3 | 21.6% |
| Vanguard S&P 500 | (VOO) | 42.2 | 272.4 | 23.9 |
| SPDR S&P 500 Trust | (SPY) | 33.0 | 446.8 | 23.8 |
| iShares Core S&P 500 | (IVV) | 26.1 | 328.2 | 23.9 |
| Vanguard Total Bond Market | (BND) | 18.0 | 83.8 | -3.5 |
| Invesco QQQ Trust | (QQQ) | 15.9 | 209.9 | 24.1 |
| Vanguard Value | (VTV) | 14.8 | 91.0 | 21.3 |
| iShares Core MSCI EAFE | (IEFA) | 13.8 | 102.3 | 5.9 |
| Vanguard FTSE Developed Markets | (VEA) | 13.6 | 107.7 | 13.3 |
| Vanguard Short-Term Bond | (BSV) | 13.6 | 42.1 | -2.2 |
| Vanguard Total International Stock | (VXUS) | 11.5 | 51.6 | 3.6 |
| iShares TIPS Bond | (TIP) | 11.3 | 37.8 | 0.4 |
| iShares Core MSCI Emerging Markets | (IEMG) | 11.3 | 75.7 | -5.0 |
| iShares Core Total USD Bond Market | (IUSB) | 10.8 | 16.5 | -3.0 |
| Vanguard FTSE Emerging Markets | (VWO) | 10.4 | 79.1 | -3.0 |
| Vanguard Total International Bond | (BNDX) | 10.2 | 46.6 | -2.5 |
| Schwab US Dividend Equity | (SCHD) | 9.4 | 30.1 | 22.7 |
| iShares Core U.S. Aggregate Bond | (AGG) | 9.3 | 91.7 | -3.3 |
| Financial Select Sector SPDR | (XLF) | 9.1 | 43.3 | 30.4 |
| Vanguard Short-Term Inflation-Protected Securities | (VTIP) | 9.0 | 19.1 | 1.9 |
Sources: CFRA, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
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