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ETF Specialist

Is There Wisdom in the ETF Crowd?

ETF investors are loading up on junk bonds and repositioning their inflation hedges; should you?

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After taking a breather in August, inflows into ETFs really picked up steam in September. Last month, investors poured more than $25 billion into U.S.-listed ETFs, boosting total year-to-date net inflows to roughly $65 billion. Strong demand from investors as well as advances of 8% and 10% for the S&P 500 and MSCI EAFE in September helped the U.S. ETF industry top $900 billion for the first time.

Each month it is an interesting exercise to observe where investors are putting their money to work, and also what investments they might be selling. There have been a few pronounced trends that have persisted in the ETF flow data for some time now that are worth thinking about. We'll discuss a couple of those trends here and what they are signaling to the markets. But before we dive in, remember that the flow data often contain "noise" and won't always be the best determinant of true investor sentiment.

John Gabriel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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