Mom-and-Pop ETFs Lure $4.8 Billion in Defiance of Swings
Mom-and-Pop ETFs Lure $4.8 Billion in Defiance of Swings
(Bloomberg) -- As financial markets around the world convulsed, a large swath of investors did what the experts have long advised: They held on tight.
Mom and pop either rode the dip or bought the dip in a two-day period that’s already seen an oil price war, the worst session on Wall Street since the financial crisis and a rebound spurred by expected stimulus from the Trump administration. Exchange-traded funds from Vanguard Group Inc., commonly used by retail investors, took in $4.8 billion in the past week, according to data compiled by Bloomberg.
“Before the coronavirus outbreak, the recent experience for retail investors was that every pullback has been followed by a quick snap-back,” said Nela Richardson, an investment strategist at Edward Jones. “In that sense, when they look at the action like we saw last week, the first natural tendency is to buy into it.”
Of course, trying to time the bottom of a sell-off is perilous, doubly so in this case, as predictions on the economic fallout from the spreading coronavirus range from a mild slowdown to one of the worst downturns since the financial crisis. Bears could also argue that buy-and-hold retail investors pose a lingering threat of capitulation in a market where convulsions seem like they could persist.
Retail investors, fired up by zero-commission trading, had fueled the rally that preceded the latest rout, seeing everything from small-caps to tech giants gain over the past year. They stood their first major test in recent days as stocks underwent one of their darkest stretches in recent history, with the S&P 500 approaching a bear market.
The $129.5 billion Vanguard S&P 500 ETF, ticker VOO, lured about $2.2 billion in inflows over the past week, leading the most among the firm’s funds. That brings VOO’s March inflows to $4.2 billion so far, compared to $8.3 billion in February -- by far the fund’s best month in its history.
In total, four of the firm’s equity ETFs each added more than $300 million in the past week.
“If you think the concerns of the spread of the virus are overblown, then the sell-off does give you an opportunity to buy assets cheaper,” said David Perlman, an ETF strategist at UBS Global Wealth Management. “That’s where some of the retail investors are trying to be more opportunistic.”
To contact the reporters on this story: Claire Ballentine in New York at cballentine@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth
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