Investors are getting smarter with their money — putting it in index funds/stock exchange-traded funds (See: What are ETFs and their benefits?). It’s the FIRE movement and people want in.

• In the first 6 months of 2021, more than $580b were invested into stock index funds.
• At this rate, there will be more money invested into equity index funds in 2021 than in the past 20 years combined.

Where is all this money coming from? The likely suspects:

• Mutual funds — which are being disrupted by ETFs — saw a record $289b outflow in 2020.
• Bonds — which are providing all-time low-interest rates (10-year US bond rates between 1.3-1.4%).

Besides money flowing out of these products, investors may be opting for ETFs, a more passive approach of investing — after trying their hands at stock picking during COVID.

Investors: ETFs aren’t only a passive way to invest. In most cases, it’s a smarter way to invest. Just ask the 60% of fund managers that failed to beat the returns of the S&P 500.

But what index funds can’t replace is the excitement of individual stock picking — which has doubled as a source of entertainment and anxiety attacks.