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Why Investing In ETFs Gained Popularity In 2014

Amy Belew of BlackRock

Three Key Drivers Pushed ETFs To A Record Year (Part 1 of 5)

In her first contribution to The Blog, Amy Belew takes a look at last year’s three key ETF investing trends and sheds some light on what this means for 2015.

The ETF market is one of my key interests as I now spend my time evaluating market trends to learn more about what global investors are seeking, and what kinds of sectors or asset classes are gaining or losing momentum based on exchange traded fund (or ETF) flows data. In 2014, it seems more investors are taking a leap into the ETF world, as flows into US-listed ETFs totaling $243 billion have broken the yearly record set in 2012. The industry continues to grow at a double digit pace.

Market Realist – Investing in ETFs is gaining popularity.

ETFs give you the advantages of investing in mutual funds, along with the added advantage of being able to trade them like a stock. ETFs allow you to trade indexes, or a particular sector, at a nominal charge, along with providing liquidity, or ease in buying and selling.

The SPDR S&P 500 ETF (SPY) is the world’s biggest ETF in terms of volume. It tracks the S&P 500 Index, which means its returns generally correspond to the returns on the S&P 500   Index before expenses. The graph above shows the annual fund flows for SPY since 2010. After seeing negative flows in 2010, SPY saw fund flows increase, reaching a high of $24.7 billion in 2014.

The top four holdings of SPY include Apple (AAPL), Exxon Mobil (XOM), Microsoft (MSFT), and Johnson & Johnson (JNJ), which make up 3.89%, 2.09%, 1.88%, and 1.59% of the ETF, respectively. Technology (QQQ) is the highest weighted sector in SPY at 17.7%, followed by health care at 15.5%.

Keep reading to understand the three ETF trends in 2014 and their implications for 2015.

Continue to Part 2

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