In 2024, ETF inflows reached record levels, fueled by a trend towards “retailization” of trading, with retail investors increasingly seeking volatile tech stocks. While traditional index funds still dominate, a rising segment of active retail investors prefers trading individual tech stocks using leverage despite associated risks and fees. The approval of single-stock ETFs in July 2022 significantly impacted the market, leading to 60 such ETFs focused on major tech names like Nvidia and Tesla, accumulating $18 billion in assets. Many of these ETFs offer two times leverage; for instance, if Nvidia rises by 1%, the ETF can yield a 2% return.
Ownership of these funds is predominantly retail, with high turnover rates; approximately 30% of GraniteShares’ $10 billion in assets turnover daily. As more retail traders seek access to U.S. tech stocks, even from markets lacking robust local options, new trading hours are being introduced, enhancing global trading opportunities. Additionally, strategies like covered-call ETFs are emerging, aiming to generate income through options while maintaining equity exposure. While these products attract young, risk-seeking investors, they are criticized for being costly and unsuitable for long-term strategies. Observers suggest that the momentum behind this trend may continue until market dynamics shift.
