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Today's big stories

The amount of money invested in exchange-traded funds topped $9 trillion last month, and investment giant BlackRock is loving it
There are three assets you need to build a medium-term portfolio that'll never lose you money – Read Now
Ferrari’s planning to spend big on electric vehicles, but investment bank Goldman Sachs isn’t impressed

Funds And Games

What’s Going On Here?

Investors are having the time of their lives: fresh data out on Monday showed the amount of money invested in exchange-traded funds (ETFs) hit a record high in May.

What Does This Mean?

ETF investments topped $9 trillion for the first time last month, according to consultancy ETFGI. And thanks to rising demand for both bond ETFs and environmentally focused ones, BlackRock – the world’s biggest provider of ETFs – said it's expecting that number to hit $15 trillion by 2025.

That suits the investment giant just fine: the amount of money its ETF business looks after hit its own all-time high of $3 trillion last month. Not that there’s any guarantee of surging profits, mind you: BlackRock’s noticed that Vanguard – the world’s second-biggest ETF provider – brought almost $40 billion more into its ETF business this year, and now the two are in an all-out price war (tweet this).

Why Should I Care?

The bigger picture: Active vs. passive.
According to BlackRock, ETFs – which have historically passively tracked an index – account for just 3% of assets held in stock and bond markets globally. A much higher percentage is in more expensive active funds, whose managers research and invest in stocks and bonds they think will perform well. But those managers are under increasing pressure to meet in the middle and offer active ETFs, whose growing popularity could help them fend off BlackRock and Vanguard.

Zooming out: Short sellers vs. retail investors.
Speaking of which, new data out on Monday showed US active investment managers have gradually been reversing their short positions – that is, bets that certain stocks will fall – over the past year. That might have something to do with the constant government and central bank support, which has only been pushing stocks in one direction for the last 12 months. Or it might be in response to the GameStop saga, which left short-sellers with bruised pride and profits alike.

You might also like: How to screen and pick exchange-traded funds.

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2. Analyst Take

How To Build A Fool-Proof Medium-Term Portfolio

What’s Going On Here?

Stocks have historically made up the core of most medium-term portfolios.

And there are good reasons for that: they’ve historically generated high returns, plenty of cheap ETFs track them, and they’re the asset class investors are most familiar with.

But while stocks are a good starting point, too much focus on them is risky.

So you’ll want to add in a couple of other assets that, together, ensure the same returns on average without all the risk.

That’s today’s Insight: the extra assets you need to build a medium-term portfolio that’ll never lose you money.

Read or listen to the Insight here

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