Interactive Investor

The top 10 most-purchased ETFs in February 2022

2nd March 2022 10:25

Sam Benstead from interactive investor

Investors are seeking protection from geopolitical tension by buying gold.

Russia’s invasion of Ukraine has spooked exchange-traded fund (ETF) investors and prompted them to buy gold, considered a “safe haven” during periods of geopolitical tension and high inflation.

The iShares Physical Gold ETC (LSE:SGLN), which owns gold bars rather than financial contracts tracking the gold price, was the third most-popular ETF investment in February, rising from seventh in January and ninth in December. It is joined by WisdomTree Physical Gold (LSE:PHGP), which became a new position in the most-bought list, entering at 10th place.

The increasing popularity of gold reflects escalating tension in Eastern Europe. Gold tends to perform well when investors are afraid because of its long history as a store of value. It is also considered a hedge against high inflation because the supply of gold is relatively fixed, so its price should rise as more money flows around the economy.

The price of gold has risen 6% in the past month, from $1,806 to $1,917 an ounce.

The most-popular ETF last month was the iShares Core FTSE 100 ETF (LSE:ISF), pushing the Vanguard S&P 500 UCITS ETF (LSE:VUSA) off the top spot.

UK stocks have been in favour this year because of rising inflation and the expectation that central banks will step in and raise interest rates.

Banking, mining and oil stocks – which make up around 40% of the FTSE 100 index – tend to perform well in this environment as higher commodity prices increase profits at resource firms and higher rates improve bank profit margins.

In contrast, the largest American shares are technology stocks and are richly valued relative to their profits. Higher interest rates decrease the appeal of companies which promise profits way into the future as investors can get a better return from safer assets today.

The FTSE 100 is down 2% this year, while the S&P 500 index is down around 9%.

Linked to this trend, the iShares Global Clean Energy ETF (LSE:INRG) dropped out of the top 10 most-popular ETFs. It owns exciting but risky clean energy stocks, which are now less appealing to investors due to interest rate rises. The US central bank – the Federal Reserve ­– is expected to raise interest rates in March.

Replacing it on the most-bought list was the WisdomTree NASDAQ 100 3x Daily Leveraged (LSE:QQQ3), which was the seventh most-popular ETF. Investors use it to place leveraged bets on America’s tech-heavy Nasdaq index. This fund provides triple the daily return of the Nasdaq 100, so investors should be careful as gains as well as losses are magnified.

Another leveraged ETF is in the top 10: the WisdomTree FTSE 100 3x Daily Leveraged ETP (LSE:3UKL) This fund provides triple the daily return of the FTSE 100. 

Bear in mind that the promotional literature of many leveraged products specifies that they should not be held for more than one day due to this. Leveraged ETFs are not suitable as long-term investments.

The rest of the list was made up of cornerstone ETF holdings for many investors, including the iShares Core MSCI World ETF (LSE:SWDA) and the Vanguard FTSE All-World UCITS ETF (LSE:VWRL). Both funds track thousands of stocks from around the world for around 0.2% in yearly fees.

The main difference is that the iShares fund focuses on “developed world” companies, so has nothing invested in China or India, while the Vanguard alternative includes emerging markets.

Investors also bought the Vanguard FTSE 250 UCITS ETF (LSE:VMID), which tracks the 100th to 350th largest stocks in the UK. This part of the market tends to grow profits faster than the biggest companies but is therefore considered more risky.

The other ETF exiting the top 10 is the tech-focused Invesco EQQQ NASDAQ-100 ETF GBP (LSE:EQQQ)

Top 10 most-popular ETFs: February 2022

Position

ETF

Change from January

One-year performance to 28 February 2022 (%)

Three-year performance to 28 February 2022 (%)

1

iShares FTSE 100 Core ETF

Up one

19.5

17.8

2

Vanguard S&P 500 UCITS ETF

Down one

21.2

62.8

3

iShares Physical Gold ETC

Up four

12.5

40.9

4

WisdomTree FTSE 100 3x Daily Leveraged

Up six

58.4

2.7

5

Vanguard FTSE 100 UCITS ETF

Down one

19.5

17.7

6

iShares Core MSCI World UCITS ETF

Up three

15.6

49

7

WisdomTree Nasdaq 100 3x Daily Leveraged

New entry

21.9

305.9

8

Vanguard FTSE All-World UCITS ETF

Down five

12.4

44.5

9

Vanguard FTSE 250 UCITS ETF

Down one

1.9

16.3

10

Wisdom Tree Physical Gold

New entry

12.2

40

Source: interactive investor. Performance figures sourced from FE Analytics. Note: the top 10 is based on the number of “buys” during the month of February 2022. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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