Investors reacted to rising markets by buying ETFs that tracked large companies globally, and in the US and UK.
Exchange-traded funds (ETFs) tracking the main UK, global and US stock market indices rose up the ranks in July, as shares rallied on the back of promising inflation data.
In July, including dividends and measured in sterling, the FTSE 100 rose 2.3%, the MSCI World index rose 2.13%, and the S&P 500 rose 1.96%.
This was a response to better-than-expected inflation numbers in the UK and US, which will alleviate pressure on central banks and could lead to less restrictive interest rates, which is good news for stock markets and economies.
The iShares Core FTSE 100 Ucits ETF rose one place to second in the most-bought ETF list, while the Vanguard FTSE All-World Ucits ETF advanced one place to third, and the Vanguard FTSE 100 Ucits ETF (distributing) rose one place to eighth. The iShares Core S&P 500 Ucits ETF was a new entry in ninth place.
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Dropping down the list was the iShares Core MSCI World Ucits ETF, which moved from second to fourth place in the most-bought ETF list for July.
Two other themes among ETF buyers stand out: the revival of technology stocks and the appeal of cash-like returns.
The Invesco EQQQ NASDAQ-100 ETF held on to seventh place after entering the top 10 in May this year. The ETF tracks the 100 largest companies listed on the Nasdaq and is often taken as a proxy for the performance of US tech shares in general.
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It is enjoying a very strong period (up more than 35% in 2023) thanks to breakthroughs in artificial intelligence technology. The rally has been driven by the largest stocks in the index, such as Apple and Microsoft, which prompted index group Nasdaq to cut its weightings to the largest shares, a change which took effect last week.
Lyxor Smart Overnight Return ETF, in sixth place, is actively managed and invests in a diversified portfolio of financial instruments and repurchase agreements in order to deliver a cash-like return. Cash-equivalent investments have risen in value over the past two years due to higher interest rates.
Rounding off the most-bought list was the Wisdom Tree Nasdaq 100 3x Daily Short ETF, a leveraged ETF that intends to move in the opposite direction to the Nasdaq 100 index.
It is therefore much more riskier than a normal ETF. The promotional literature of many leveraged products specifies that they should not be held for more than one day, and our article explains why in more detail.
Dropping off the list in July was the iShares Physical Gold ETC.
Top 10 most-popular ETFs in July 2023
|Position||ETF||Change on last month||One-year performance (%)||Three-year performance (%)|
|1||Vanguard S&P 500 UCITS ETF||No change||6.4||48.5|
|2||iShares Core FTSE 100 Ucits ETF||Up one||7.6||45|
|3||Vanguard FTSE All-World Ucits ETF||Up one||6.6||37.1|
|4||iShares Core MSCI World Ucits ETF||Down two||7.2||42.1|
|5||Vanguard S&P 500 ETF||No change||6.4||48.5|
|6||Lyxor Smart Overnight return ETF||No change||3.5||4.2|
|7||Invesco Nasdaq 100 Ucits ETF||No change||15.6||49.1|
|8||Vanguard FTSE 100 Ucits ETF (distributing)||Up one||7.6||45|
|9||iShares Core S&P 500 Ucits ETF||New entry||6.4||48.6|
|10||Wisdom Tree Nasdaq 100 3x Daily Short ETF||No change||-58.7||-88.1|
Source: FE FundInfo/interactive investor, 1 August. Note: the top 10 is based on the number of “buys” during the month of July.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.