Last week, ETFs hit a record $9.1 trillion in assets under management,
proving that investors know that time in the market beats timing the market.
We’ll never say it enough: time in the market beats timing the market.
Warren Buffet famously said that know-nothing investors can beat the returns of most professionals simply by periodically investing in index funds.
Retail investors seem to be taking this advice to heart.
Morningstar data reveals that more than $700 billion have been invested in ETFs during the first seven months of 2021.
Incredibly, this is almost as much as the $735 billion invested for all of 2020.
If this trend continues, capital flows into ETFs could be double what they were last year.
In fact, in recent year, capital flows have favored the ETF industry exponentially compared to traditional mutual funds.
So much so that even a financial dinosaur such as JPMorgan Chase is converting some of its mutual funds to ETFs.
The ETF world is made up of over 2,000 funds, but 3 funds in particular are draining a large part of the capital inflows.
1. Vanguard S&P 500 ETF
Vanguard’s S&P 500 ETF (VOO) is arguably the most famous and popular in the world.
The fund tracks the performance of the 500 largest U.S. companies listed on the S&P 500.
As such, it is considered the benchmark for overall US stock returns.
Indeed, it includes household name stocks such as Apple, Microsoft, McDonald’s, Walmart, Caterpillar, Disney and 3M.
As you can see, holding this fund is possible the easiest way of exposing yourself to the growth of the largest American companies.
Plus, considering that these 500 American companies are transnational conglomerates, you are also exposed to the growth of the world economy.
Since January, $33.9 billion have been injected by investors into the fund.
VOO has delivered 19% returns since January and more than 30% returns over the past 12 months.
2. Vanguard Total Stock Market ETF
The Vanguard Total Stock Market ETF (VTI) gives investors the opportunity to own the entire stock market – not just the largest 500 American companies.
This ETF seeks to track the performance of the CRSP US Total Market Index, which includes large, mid and small-cap equity diversified across growth and value styles.
This means that in addition to the S&P 500 stocks, you also hold stocks that are not part of this index.
Here’s a small sample of the 3900+ stocks held by this fund:
This broad exposure makes VTI the third-largest ETF in the world, with nearly $300 billion in assets under management (AUM).
Since January, investors pumped $26.1 billion worth of capital into this fund.
Clearly, the fund’s returns show this is a solid strategy:
- If you invested in this fund in January, you’d be looking at a total return of nearly 18%.
- Over the past 12 months, the fund generated a handsome 35% return.
- The fund posts 100% returns over the past 5 years.
3. iShares Core S&P 500 ETF
The 3rd ETF with the largest inflow of capital is iShares S&P Core 500 ETF (IVV).
I won’t go into too much detail because it is basically the same as VOO.
BlackRock’s flagship fund also tracks the performance of the 500 largest American companies listed on the S&P 500.
Thus, you should consider purchasing this fund as a core part of your portfolio for the long term.
That’s precisely what global investors are doing: since January, they’ve invested nearly $14 billion in to this fund.
The fund delivered 18% returns since January and 40% returns over the past 12 months.
Honorable Mention n°1: Vanguard Value ETF
Investors favor this fund because it is a convenient way to match the performance of the US’ largest value stocks.
Since january, nearly $11 billion worth of capital was invested in this fund.
Here are the fund’s top 10 holdings:
- Berkshire Hathaway
- JPMorgan Chase
- Johnson & Johnson
- United Health
- Procter & Gamble
- Bank of America
- Exxon Mobil
- Pfizer, Inc
Upon reading this list, it’s easy to understand why this ETF is so popular.
In terms of returns, the fund’s average annual performance is also impressive:
- 1-year return: 33%
- 3-year return: 11.50%
- 5-year return: 12.62%
- 10-year return: 12.78%
- Since inception: 8.82%.
Honorable Mention n°2: iShares Core MSCI Emerging Markets ETF
The iShares Core MSCI Emerging Market ETF (IEMG) seeks to track the investment results of an index composed of large-, mid- and small-capitalization emerging market equities.
With a 42% return over the past 12 months, it’s easy to understand why investors have injected nearly $10 billion into this fund since January.
This fund’s exceptional returns are due to its exposure to stocks in high-growth geographical areas, most notably Asia.
With holdings such as Alibaba, Tencent, Taiwan Semiconductors and Samsung, investors can expect plenty of long-term capital appreciation.