Retail traders are taking on more risk by purchasing ETFs following equity sectors and commodities, according to a report from Charles Schwab Corp.
Among this client segment, about 35% of flows went into sector ETFs in the first quarter to lead all categories, and a big jump from the fourth quarter. [Commodity ETF Assets Hit Record]
“Retail traders sought exposure to real estate, financials and technology,” Schwab said in a quarterly update.
ETF assets custodied at Schwab stood at $138 billion as of March 31, 2012, up 14% from the same period in 2011.
The firm also manages its own ETFs that boast very low fees. [Charles Schwab Gaining in ETFs]
Schwab breaks its client base down into retail traders, retail investors and registered investment advisors, or RIAs.
Among retail traders, commodity ETFs “were back in favor, representing 19% of ETF flows, with two-thirds of these flows going into gold,” Schwab said. [Gold ETF Investors Unfazed by Pullback]
In bonds, although some U.S. fixed-income ETFs saw net outflows in the first quarter, retail traders were seeking income with high-yield ETFs. [Junk Bond ETFs Come with Risks]
“While approximately 45% of flows went into U.S. equity ETFs across all segments, retail traders accessed this asset class primarily with sector ETFs, which represented three-quarters of these flows, versus just over one-third of flows for other segments,” Schwab added.
Some traders use sector ETFs to take positions in entire industries rather than individual stocks.