Financial Insights That Matter
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The market has surged since the conclusion of the 2024 Presidential election, with ETFs experiencing a significant swell in investments.
In this episode of Stocks In TranslationTodd Sohn, an ETF strategist at Strategas Asset Management, joins Yahoo Finance markets and data editor Jared Blikre and producer Sydnee Fried to discuss ETFs, market capitalization, and risk flows.
“We have seen a massive amount of money go into equity ETFs, roughly $240 billion or so over the last three months. That is the highest on record,” said Sohn. “Part of this is the adoption of ETFs, and part of it is also everyone’s just jumping into the pool. They make it easy. And so I always look at ETFs as this great lens into investor psychology.”
Blikre introduces the “word of the day”: market cap, or “the total value of a company’s outstanding stock calculated by multiplying the current share price by the total number of shares.” Market cap determines how stocks are valued and how some indexes are weighted.
However, Sohn warns investors to exercise caution when exploring small caps. “You want to make sure when you buy small caps that you know what’s in the index itself. Because [in] the Russell 2000, some 40 to 50% of it is unprofitable. These companies do not make money,” said Sohn. Alternatively, investors can opt for indexes like the S&P 600, which include profitability filters.
Looking ahead, Sohn predicts that in the third year of the current bull market, ETFs will continue to break records as adoption grows. He also advises planning for a market pullback, which is common in a bull market. “Depending on your time horizon and your risk, it cannot hurt to have some sort of plan,” said Sohn. “Just have a plan for when that correction strikes.”
Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes hereor watch on your favorite streaming service.
This post was written by John Tejada.
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