ETF Trends
ETF Trends

Exchange traded funds (ETFs) are a useful tool for investing and investors agree. Over the past couple of years trading volumes in the various ETFs have shot up. Let’s take a look at which ETFs investors crave the most.

ETF trading volume jumped from $142 billion in 2004 to $3 trillion in 2008, and settling around $1.4 trillion in June 2009, write Yan Zilbering and Donald Bennyhoff for IndexUniverse. Since 2008, nost of the ETF trading volume has been centered around a narrow selection of ETFs from the 850 or so available as of June 2009.

The top 20 most heavily traded ETFs by dollar volume amount to around 80% of total ETF trades. At the forefront are the most established ETFs with the most assets that are popular among investors of all types. The included ETFs account for about 50% of all ETF trading volume and they track the most common, broad-based domestic indexes:

  • SPDRs S&P 500 (SPY): avg. daily turnover since Jan. 2008 is 43%
  • PowerShares QQQ (QQQQ): avg. daily turnover since Jan. 2008 is 43%
  • iShares Russell 2000 Index (IWM): avg. daily turnover since Jan. 2008 is 54%
  • DIAMONDS Trust, Series 1 (DIA): avg. daily turnover since Jan. 2008 is 28%

There are also a group of nine narrowly focused sector and sub-sector ETFs, which represent around 16% of ETF trades, used to implement various strategies through the easy access of specific areas of the market.

  • Financial Select Sector SPDR (XLF): avg. daily turnover since Jan. 2008 is 45%
  • Energy Select Sector SPDR (XLE): avg. daily turnover since Jan. 2008 is 40%
  • Oil Services HOLDRs (OIH): avg. daily turnover since Jan. 2008 is 54%
  • SPDR Gold Shares (GLD): avg. daily turnover since Jan. 2008 is 6%
  • iShares Dow Jones US Real Estate (IYR): avg. daily turnover since Jan. 2008 is 58%
  • iShares MSCI EAFE Index (EFA): avg. daily turnover since Jan. 2008 is 4%
  • iShares MSCI Emerging Markets Index (EEM): avg. daily turnover since Jan. 2008 is 12%
  • iShares FTSE/Xinhua China 25 Index (FXI): avg. daily turnover since Jan. 2008 is 20%
  • iShares MSCI Brazil Index (EWZ): avg. daily turnover since Jan. 2008 is 18%

The last set includes seven leveraged ETFs, which produce the multiple or inverse returns of the broad market or sector. This group is usually used for capitalizing on the short-term movements in the markets.

  • Ultra S&P500 ProShares (SSO): avg. daily turnover since Jan. 2008 is 61%
  • UltraShort S&P500 ProShares (SDS): avg. daily turnover since Jan. 2008 is 109%
  • Ultra QQQ ProShares (QLD): avg. daily turnover since Jan. 2008 is 90%
  • UltraShort QQQ ProShares (QID): avg. daily turnover since Jan. 2008 is 178%
  • UltraShort Financials ProShares (SKF): avg. daily turnover since Jan. 2008 is 242%
  • Direxion Daily Financial Bull 3X Shares (FAS): avg. daily turnover since Jan. 2008 is 128%
  • Direxion Daily Financial Bear 3X Shares (FAZ): avg. daily turnover since Jan. 2008 is 241%

By looking at the data, it is noticeable that the more heavily traded ETFs traded at a higher turnover rate. ETFs tracking volatile sectors have been traded at even higher levels.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.