For exchange-traded funds (ETFs), fund flows are a critical metric when evaluating the best ETFs to buy. These flows measure the net movement of money into or out of an ETF over a specific period, providing insights into investor sentiment and market trends.
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Fund flows are calculated by examining the buying and redemption of ETF shares. When new shares are created due to investor purchases, inflows occur, increasing the ETF’s assets under management (AUM). Conversely, outflows happen when shares are redeemed as investors sell, reducing the AUM. The net fund flow reflects the balance between shares created and shares redeemed.
Fund Flows Are Important for Understanding Investor Sentiment
Fund flows are a critical tool for understanding investor sentiment. Positive fund flows (inflows) often signal growing investor confidence and interest in the ETF’s underlying assets. On the other hand, negative fund flows (outflows) may indicate declining interest or a bearish outlook.
Additionally, fund flows play a significant role in liquidity. Higher fund flows typically enhance liquidity, enabling smoother trading with minimal price impact. Overall, fund flows indicate investor behavior and market dynamics.
Now let us look at the top 3 ETF according to fund flows, using the TipRanks ETF Screener.
IWM Offers Exposure to the Russell 2000 Index
iShares Russell 2000 ETF (IWM) offers exposure to the Russell 2000 Index, and not a single stock comprises a significant portion of assets. Over the past year, IWM has surged by more than 35%. This ETF has $81.3 billion assets under management (AUM) and has seen fund flows of $835.9 million.
Overall, analysts are cautiously optimistic about IWM, with a Moderate Buy consensus rating based on 1,275 Buys, 627 Holds and 49 Sells. The average IWM price target of $274.79 implies an upside potential of 14.1% from current levels.
FVD Offers Investors Access to Stocks Paying Dividends
The First Trust Value Line Dividend Index Fund (FVD) provides investors access to stocks of companies that pay dividends. FVD relies on rankings from Value Line, a renowned research firm that evaluates stocks using a proprietary methodology. However, this ETF has a higher expense ratio of 0.6% compared to other popular dividend ETFs. Year-to-date, FVD has surged by 16.7% and recorded fund flows of $576 million.
Overall, analysts remain cautiously optimistic about FVD, assigning a Moderate Buy consensus rating based on 132 Buys, 77 Holds, and eight Sells. The average FVD price target of $49.05 suggests an upside potential of 5.3% from current levels.
XMMO Tracks Mid-Cap Stocks
Invesco S&P MidCap Momentum ETF (XMMO) tracks an index of U.S. mid-cap stocks. Year-to-date, XMMO has surged by more than 45% with fund flows of $518.7 million. Overall, analysts are cautiously optimistic about XMMO with a Moderate Buy consensus rating based on 62 Buys and 16 Holds. The average XMMO price target of $140.23 implies an upside potential of 4.1% from current levels.
