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Editor s note: This is adapted from the Morningstar Direct U.S. Asset Flows Commentary for January 2021. Download the full report.
While the performance of most major asset classes took a step back in January 2021 following a stellar 2020, investor preferences remained largely consistent. Long-term mutual funds and exchange-traded funds picked up $95 billion in new assets, marking the 10th consecutive month of inflows since the $326 billion exodus from those funds in March 2020.
Most of January s inflows again found their way to passively managed funds, which took home $55 billion. ETFs many of which are passively managed raked in $58 billion during the month versus $37 billion for open-end mutual funds, marking the 30th time they ve had the advantage over mutual funds in the prior 36 months.
Alphabet (GOOGL) accounted for nearly a quarter of the index, the highest percentage in at least two decades. That concentration had fallen to 21% by the end of the year.
As of September, those five stocks were up an average of nearly 60% for the year, and due to their large sizes, contributed to more than 80% of the S&P 500’s gains. But half of the stocks in the S&P 500 were actually down for the year, and more than a quarter were trading in bearish territory, 20% or more below where they started in 2020. That means the index was disproportionately lifted by just a few names. Investors in S&P 500 funds are making bigger bets on fewer stocks than they likely realize.
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