It is no wonder, considering this was the best January ever for ETF inflows.
Investors poured in some $167 billion into exchange-traded funds (ETFs) in January, a record for the month, according to ETFGI, an ETF data tracker. There is now about $14 trillion invested in U.S. ETFs, which is 31% more than the $10.7 trillion in January 2025.
And that’s about 570% more than the $2 trillion in U.S. ETF assets 10 years ago.
The hottest ETF in the world in recent years has been the Vanguard S&P 500 ETF (VOO +0.65%), which is now the world’s largest ETF with some $1.5 trillion in assets. In January alone, it captured $16.3 billion in net inflows.
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The very first ETF, the SPDR S&P 500 Trust ETF (SPY +0.65%), established in 1993, is the third largest, with about $701 billion in assets. It sits just behind the iShares Core S&P 500 ETF (IVV +0.64%) with some $754 billion in assets.
Two of these ETFs, the Vanguard S&P 500 and the SPDR S&P 500 Trust, are among the 10 most popular investments among traders on the Robinhood Markets online brokerage app. The Vanguard fund is fifth, and the SPDR ETF is ninth.
In fact, they are more popular than some of the “Magnificent Seven” and big-name stocks, including Netflix, Alphabet, Meta Platforms, Palantir Technologies, and Walt Disney.
What is driving the popularity of these large-cap ETFs?
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ETFs: Diversifiers for uncertain markets
There are a few reasons why these two massive ETFs are more popular than some of the other “magnificent” options out there.
A big part of it is the traditional appeal of ETFs as baskets of stocks that track an index, in this case, the S&P 500 (^GSPC +0.69%). As such, they capture the returns of the biggest and best stocks in the world, but they do so in a way that they are diversified across 500 stocks, weighted by market cap.
The track record is undeniable. Over the past five years, the S&P 500 has posted an average annualized return of 11.8%, and it’s even better over the last 10 years with a 13.7% annualized return.
Going back even further, the index has returned 8.7% on an annualized basis over the past 20 years, and that includes the global financial crisis. The 30-year snapshot, which includes the dot-com boom and bust, shows an 8.2% annualized return. But with dividends reinvested, those returns jump to 10.8% and 10.2%, respectively.
This has long been the value proposition for large-cap index ETFs, and that hasn’t changed.
Eight of the Robinhood top 20 are ETFs
What perhaps makes these ETFs more popular now is that volatility is rising, with the VIX Volatility Index rising to over 20, which is 37% higher than it was at the start of the year.
Investors are getting more nervous about the high valuations of many tech stocks and are questioning whether the massive investments in AI will pay off or be a drag on earnings. This is causing a rotation into cheaper, more stable stocks and sectors.
They may see these large-cap ETFs as ways to capture the upside from some of the stronger megacaps, like Nvidia and Apple — No. 1 and 2 on the Robinhood 100 — while potentially benefiting from an index ETF diversified with a mix of value and growth stocks.
The two S&P 500 ETFs aren’t the only ones that are popular among Robinhood investors. Among the top 20 most popular Robinhood investments are eight ETFs. What’s particularly notable is they are pretty varied, perhaps reflecting the uncertainty out there.
One is the Vanguard Total Bond Market ETF (BND 0.01%), which indicates that investors are trying to de-risk. Two others are the Vanguard FTSE Developed Markets ETF (VEA +1.06%) and the Vanguard FTSE Emerging Markets ETF (VWO +1.63%) as investors look overseas for better values and growth prospects.
In addition, the Vanguard Total Stock Market ETF (VTI +0.61%) is among the top 20, showing that investors are seeking maximum diversification.
All in all, it is a pretty good indication that investors are flocking right now to ETFs for the benefits of diversification, value, and stability.
