Exchange-traded fund (ETF) investing is becoming more popular among American investors than single-stock buying, according to research from Bank of America (BofA). Among ETF alternatives, investors are eager to increase their exposure to actively managed funds, cryptocurrencies, and commodities. This article is a quick guide on EFT and what to expect for the rest of this year.
Investments in ETFs Surge Past Stocks
According to BofA Securities’ most recent weekly report on equity client flow trends, year-to-date inflows into ETFs have surpassed those into individual equities.
For a fourth week running, BofA reported that its clients purchased ETFs in all three main strategy categories: blended, value, and growth investing. Eight of the eleven business categories saw net buying of ETFs by investors, with discretionary ETFs leading the way with the fifth-largest inflow since BofA started tracking such data in 2017. For a second week running, Energy ETFs saw the biggest outflows, maybe indicating that investors were actively managing their ETF portfolios.
Together with technology, which has seen net inflows for nine of the last eleven weeks, communication services have been one of the most popular sectors for ETFs over the past 29 weeks. Starting in February this year, strong inflows are another way investors can access a Chinese stock market recovery through ETFs.
Investors in ETFs Plan to Increase Their Exposure
Actively managed ETFs are growing in popularity as an investment option. In the U.S., Europe, and Greater China, the firm polled 325 ETF investors, 40% of whom oversee assets of more than $1 billion and 24% of whom own more than 50% of their portfolio in ETFs.
Eighty-two per cent of investors worldwide said they intended to raise their ETF allocation throughout the following year, according to a recent survey. Investors reported being most optimistic about stocks, alternatives, and cryptocurrency over the following year. Larger funds prevailed when asked what minimum amount of AUM U.S. investors need in an ETF: 43% stated $101 million to $250 million, while nearly a third said $51 million to $100 million.
Another indication that ETFs are hot is the SPDR S&P 500 ETF Trust (SPY) reaching an all-time high for AUM in late February as a result of the artificial intelligence (AI)-driven stock rally in Nvidia (NVDA) and other Big Tech companies generating a need for exposure to the so-called Magnificent Seven, of which Nvidia is a member.
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