This year's stock rally has has drawn more investors back into the market, boosting assets in exchange-traded funds to near record levels.
The rapid increase shows that ETS — which allow you to trade market indexes, sectors, commodities and currencies as easily as a share of stock — have become the preferred method for retail and professional investors alike to get quick exposure to the market.
Total U.S.-listed ETF assets climbed 8.3 percent in January to $1.150 trillion, just short of their previous record of $1.152 trillion, according to IndexUniverse. U.S. ETFs took in about $29 billion last month, the most since September 2012, according to the research firm.
“Investors definitely sense the improvement in the global macro picture and need their quick sugar high exposure to equities,” said Brian Stutland of Stutland Equities. “Thus, rather than figure out which stock to pick in a sector, they can just bang out exposure to oil, gold, emerging markets, industrials, etc.”
It was a January not to be missed as the S&P 500 jumped 4.4 percent, the benchmark’s best start to a year since 1997. Earnings surprises, better-than-expected economic data and the Fed’s pledge to keep rates low until 2014 boosted stocks. The appearance of progress in Greek bailout negotiations lifted the Euro, easing worries about a crisis.
“Pros are using the ETF space to quickly trade in areas that used to be tougher to trade in, i.e., foreign currencies,” said Michael Murphy, president of Rosecliff Capital.
When looking at which ETFs received the biggest inflows, a “risk-on” mentality was clearly in place to start 2012 as these events unfolded. The two most popular ETFs in terms of inflows were the Vanguard MSCI Emerging Markets ETF and the iShares MSCI Emerging Markets Index Fund, according to IndexUniverse. ETFs that invest in high yield bonds also garnered a lot of interest.
Investors believe the agility and broad exposure of ETFs may cut down on their chances of missing out on a market surge, when before they had to rely on buying individual stocks or mutual fund that would do it for them. The mutual fund industry experienced inflows since the start of 2012, but not nearly at the speed of ETFs, according to figures from the Investment Company Institute.
“Everyone is using ETF’s, from the retail investors, the investment professionals, to the day traders,” said Mitchell Goldberg of ClientFirst Strategy. “ETF sponsors really tout diversification and unique slices of the market, such as trading volatility or tracking metals prices. They give investors a ‘go anywhere at any time’ ability.”
For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:00 ET on CNBC. Follow @CNBCMelloy on Twitter.
Got something to say? Send us an e-mail at firstname.lastname@example.org and your comment might be posted on the Rapid Recap! If you'd prefer to make a comment, but not have it published on our Web site, send your message to .