Retail Traders Are Now Parking Their Cash in Boring Stock ETFs

Meme stock mania has cooled and now Crypto fever has, too. So what’s a young Reddit retail trader to do with his cash?

The answer, it would appear, is to park it in boring broad stock-market baskets.

In what’s becoming the modern-day equivalent of stockpiling cash when at a loss for where to invest -- at least for the growing ranks of newbies who embrace a win-big-or-lose-big mentality -- demand for exchange-traded funds that track large indexes like the S&P 500 and the tech-heavy Nasdaq 100 is soaring.

Over the past week alone, retail investors’ top bets pushed $434 million into State Street’s SPDR S&P 500 ETF Trust (SPY) and $235 million into Invesco’s QQQ Trust Series 1 (QQQ), according to Vanda Research.

Retail Traders Are Now Parking Their Cash in Boring Stock ETFs

“Large inflows into ETFs usually indicate that retail investors have little conviction in specific themes or niches,” said Eric Liu, co-founder of Vanda Research, a firm that tracks retail-trading flows in the U.S. “And so they just pile into large index trackers for lack of a better alternative.”

The U.S. stock market has been hit recently by growing inflation concerns which triggered massive selling of riskier stocks while cryptocurrencies like Bitcoin were whipsawed, with a basket of 37 so-called meme stocks tracked by Bloomberg struggling to pick up steam.

Recent purchases by retail investors show they’re even broadly souring on so-called FAANG stocks -- Facebook Inc., Apple Inc., Amazon Inc. and Google Inc. -- as well as Microsoft Inc. and Tesla Inc.

With the S&P 500 Index up more than 40% in the past year, leaving it hovering near a record, and the vaccine rollout allowing the re-oppening of offices, restaurants and bars, some individual investors appear to have decided to turn off their trading apps, put their money in a -- relatively speaking -- less risky space and enjoy the summer.

©2021 Bloomberg L.P.

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