ETFs Hit Record Inflow: Should You Jump In?

If you’re looking for a diversified and low-cost investment, an ETF may be right for you. Shutterstock

In the midst of historical stock market rallies, exchange-traded funds (ETFs) are closing out the year with record-breaking numbers. ETFs hit net inflows of $1.03 trillion for the first time in history following a $164.43 billion intake in November. That brings total ETF assets to a record of more than $10 trillion.

And the funds that led the pack came from big names like Vanguard, Blackrock, and Invesco. Here are some of the biggest winners:

• Vanguard S&P 500 ETF
• iShares Core S&P 500 ETF
• Vanguard Total Stock Market ETF
• Invesco QQQ Trust
• iShares Core U.S. Aggregate Bond ETF

Was this a sudden spike? ETFs have been around in the United States since the 1990s. And they have long been recognized for their low costs, liquidity, and instant diversification.

But before you decide to invest, it’s important to know all you can about ETFs and the different types out there.

What Is an ETF?

An ETF is a basket of different assets like stocks and bonds. You can buy a share of an ETF through your brokerage account in the same way you’d buy a share of a common stock. ETFs can invest in many stocks. And the top ETFs are managed by teams of professionals at established financial institutions.

With that said, they can take out the time and effort of researching and choosing individual stocks or bonds to create a portfolio. This has made them quite popular among novice investors.

Another attractive quality is their generally low costs. The average ETF fee or expense ratio is around 0.42 percent. But you can find ETFs with expense ratios closer to 0.04 percent. That means that you’d be paying an annual fee of $4 for a $10,000 investment.

Just as fees can vary, so can types of ETFs. Some invest in stocks. Some invest in bonds. Others invest in commodities like oil and gold, while others invest in cryptocurrencies like Bitcoin. Each ETF has its own objective and investment strategy as well.

So before you invest, let’s look at the different kinds of ETFs at your disposal.

Index ETFs

Also called passive ETFs, index ETFs are designed to track or mimic the performance of a particular market index like the S&P 500. This index contains stocks of the largest companies in the United States and is often seen as a representation of the overall stock market. As you can see from above, two of the four leading ETFs this year track the S&P 500. But there are other broad indexes like the Russell 2000, the Nasdaq, and the Dow Jones Industrial Average (DJIA).

Because index ETFs are passively managed to capture the performance of an established index, they are often associated with lower fees than actively managed funds.

Here are some of the largest index ETFs.

• SPDR S&P 500 ETF Trust
• iShares Core S&P 500 ETF
• Vanguard S&P 500 ETF
• Vanguard Total Stock Market ETF
• Invesco QQQ Trust Series I

Active ETFs

Active ETFs are not designed to reflect the performance of a particular index. Instead, their managers actively use different strategies and research to “actively” pick the securities in the fund in order to beat market index or deliver higher returns. As a result, active ETFs often come with higher fees than their passively managed counterparts. Here are some of the top actively managed ETFs:

• JPMorgan Equity Premium Income Fund
• Dimensional U.S. Core Equity 2 ETF
• JPMorgan Ultra-Short Income ETF
• JPMorgan NASDAQ Equity Premium Income ETF
• Fidelity Total Bond ETF

Sector ETFs

Sector ETFs invest in the stocks of companies involved in specific industry sectors like financials, energy, and technology. The performance of a sector ETF would depend on the strength of the target sector or industry at any given time. So, if you are confident in the performance and potential of a specific one, then you may try to invest in an ETF that tracks that sector. Here are some areas you can explore as defined by the Global Industry Classification Standard (GICS):

• Communication services
• Consumer discretionary
• Consumer staples
• Energy
• Financials
• Health care
• Industrials
• Information technology
• Materials
• Real estate
• Utilities

Keep in mind that these ETFs may not be as diversified as index ETFs or active ETFs. Industry sectors can be largely affected by different variables like emerging technologies, government policies, geopolitical turmoil, and the state of the global economy.

The top sectors as defined by ETF Database rankings are tech, financials, health care, energy, and real estate.

Commodity ETFs

These ETFs are designed to replicate the value of raw materials like gold, oil, and even crops. Some invest in the companies involved with these raw materials like gold mines. Others invest in the physical commodity itself.

Commodity ETFs can be highly volatile. Many financial experts recommend not having more than 5–10 percent of your portfolio invested in commodities.

To help you get started, here are some popular commodity ETFs:

• Franklin Responsibly Sourced Gold ETF
• Invesco Agriculture Commodity Strategy No K-1 ETF
• USCF Gold Strategy Plus Income Fund
• Simplify Commodities Strategy No K-1 ETF
• USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund

Bitcoin ETFs

Officially called spot Bitcoin ETFs, these ETFs are designed to track the price of Bitcoin. These ETFs hold Bitcoin in reserves. However, purchasing a share of a spot Bitcoin ETF is not the same as directly investing in crypto. You can purchase shares of a spot Bitcoin ETF through a regular brokerage account rather than a crypto exchange. This has made it particularly attractive to investors who may have been hesitant about buying individual crypto in the past. In fact, the first spot Bitcoin ETFs were approved by the Securities and Exchange Commission in 2024. Here are some of the leading spot Bitcoin ETFs:

• IShares Bitcoin Trust
• Grayscale Bitcoin Trust
• Fidelity Wise Origin Bitcoin Fund
• ARK 21Shares Bitcoin ETF
• Bitwise Bitcoin ETF Trust

Bond ETFs

These ETFs invest in various types of bonds. These can include corporate, government, and municipal bonds from across different countries. Here are some of the top-performing bond ETFs:

• Vanguard Total Bond Market ETF
• iShares Core U.S. Aggregate Bond ETF
• Vanguard Total International Bond ETF
• iShares 20+ Year Treasury Bond ETF
• Vanguard Intermediate-Term Corporate Bond ETF

Should You Invest in ETFs?

If you’re looking for a diversified and low-cost investment, then an ETF may be right for you. But as you can see, there are many types of ETFs out there and they act very differently. This can be a plus, as they appeal to different types of investors and their preferences. There are ETFs for those who want to build a portfolio of ETFs tracking major stock indices, the bond market, physical raw materials, crypto, and more. Plus, many robo-advisors build portfolios with ETFs, making these attractive options for the set-it-and-forget-it investor.

There are also risks with ETFs as there are with any type of investment. You need to take a close look at factors like investment objectives, fees, liquidity, and market risks to find the right ETF for you.

The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.