What August’s Red-Hot ETF Data Means

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

A Red-Hot August for ETF Inflows

What can you say about the world of exchange-traded funds (ETFs) besides the fact that they are just red hot?

Well, we can start by looking at the numbers for August to see just how hot these investment vehicles have become. One data point that tells us a lot about just how earnest the embrace of ETFs has been is fund inflows.

In August, U.S.-listed ETFs saw approximately $15 billion in fund flows, pushing the number of total assets into the segment up by 3% to another new record total. As of the end of August, U.S.-listed exchange-traded funds held more than $1.19 trillion in assets.

Interestingly, 2013’s stellar gains in U.S. stocks actually outpaced the inflows so far in 2014. According to data from the industry, U.S.-listed ETFs have seen approximately $106 billion in fund flows through the first eight months of the year. That compares relatively modestly with the $130 billion through the same eight-month period last year.

Still, the gains in August were impressive, and there just seems to be no stopping the popularity and appeal of ETFs to individual investors, institutional buyers, professional traders — and just about any type of investor who wants low-cost, efficient exposure to specific indices, sectors, countries or asset classes.

So, which funds notched particularly strong inflows in August?

This may come as a surprise to some, but to readers of this publication, it shouldn’t. In fact, throughout the year I’ve been talking about the biggest surprise in the markets in 2014, and that is the continuation of very low bond yields (low interest rates). The decline in bond yields means rising bond prices, and judging by the August inflows, bonds continue to impress.

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The biggest fund flows in August were seen in the iShares 7-10 Year Treasury Bond (IEF), but that wasn’t the only Treasury bond fund in the top 10 fund gatherers. The iShares 1-3 Year Treasury Bond (SHY) captured the third-highest inflows in the month, while the iShares 3-7 Year Treasury Bond (IEI) and iShares iBoxx $ High Yield Corporate Bond (HYG) also were among the 10 biggest asset recipients in August.

Of course, stock funds also captured their fair share of inflows, with the Vanguard S&P 500 (VOO), the iShares Core S&P 500 (IVV) and the iShares MSCI Emerging Markets (EEM) atop the equity funds capturing the biggest inflows.

The verdict is in my friends — both bond and stock ETFs are red hot. So, if you’re not allocated to at least some ETFs, you’re likely not investing as well as you could be.

The Secret to Success

“The secret of getting ahead is getting started.”

–Mark Twain

Do you want to succeed in life? Do you want to conquer your obstacles? Do you want to achieve your dreams? If you’re reading this, I’d venture to say the answer is yes. However, before you can declare yourself a victor in your chosen activity, you have to actually get started. In fact, one of the biggest obstacles to success in life is to put off getting started on what you really want. Don’t do that any longer. Just take Twain’s words to heart — and go for it!

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

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In case you missed it, I encourage you to read my e-letter column from last week about whether volatility will return in September. I also invite you to comment in the space provided below.

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