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Feb 26, 2020

Wild stock swings can't deter retail buyers of Vanguard ETFs

Wall Street

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The back-and-forth in U.S. stocks may be unnerving investors around the world, but a huge group of them seems to be keeping the faith in the largest bull-market in history.

Even as the coronavirus scare sent equities tumbling this week, mom-and-pop investors made big bets into Vanguard Group Inc.’s exchange-traded funds. Inflows into those ETFs roughly tripled relative to their average daily flow over the last year, jumping to US$1.3 billion during Monday’s equity meltdown, according to Bloomberg Intelligence’s analyst Eric Balchunas. The US$135 billion Vanguard S&P 500 ETF, ticker VOO, which tracks the performance of the American equity benchmark, led the intake.

Retail investors have doubled their trades in equities over the last several months, defying concern about the economic impacts of the virus outbreak and U.S.-China trade relations. That group often turns to Vanguard funds because of their low cost, while the trading crowd leans toward ETFs that are more liquid -- even if they are also more expensive.

 “They’re heeding the very wise advice of investment analysts, don’t be a trader,” said Chris Gaffney, president of world markets at TIAA. “That’s a good long-term indicator for the markets in that investors are still buying into those funds that seem to be more long-term.”

Brokerages cutting commission fees to zero and an equity rally that contributed US$7.5 trillion in market values last year are enticing even the most cautious retail investors to jump in. Daily average trades at E*Trade Financial Corp. and TD Ameritrade Holding Corp. have almost doubled to all-time highs since last September, data compiled by Sundial Research showed.