Research summary

Investor risk-taking, measured at midyear 2024

August 08, 2024

Investors’ appetite for risk rose during both the 6- and 12-month periods ended June 30, 2024, lifting our Risk Appetite Speedometers [12-page PDF] above their long-term averages. At the same time, investors continued to invest heavily in money market and traditional fixed income funds, considering fund inflows as percentages of base fund assets.

A semiannual publication of Vanguard’s Investment Advisory Research Center, our Risk Appetite Speedometers gauge the level of risk taken by all investors in U.S.-domiciled open-end mutual funds and exchange-traded funds (ETFs). Risk-taking is measured by the differences in net cash flow between higher- and lower-risk asset classes, relative to the average differences over the past five years. 

Investors’ risk appetite grows

Vanguard’s Investment Advisory Research Center Risk Speedometers as of June 30, 2024

Vanguard’s 6- and 12-month risk speedometers are represented in a pair of half-pie charts. The charts go from 0 to 180 degrees and are color-coded to indicate below-average, average, and above-average levels of investment risk appetite. Both charts show average levels of risk appetite—at the end of June, 6 months ago, and one year ago. The 6-month chart shows the current reading about three-quarters of the way through the average risk zone, up from roughly one-quarter six months earlier. The 12-month chart shows the current reading just a bit above average, up from a nearly below-average level 12 months before.

Sources: Vanguard, using data provided by Morningstar, Inc., as of June 30, 2024.

Notes: Vanguard’s risk speedometer measures the difference between net cash flows into higher-risk asset classes (U.S. equity, international equity, emerging markets equity, sector equity, alternative, and nontraditional bond, including funds that invest in high-yield issues, bank loans, and emerging markets) and flows into lower-risk asset classes (U.S. taxable bond, tax-exempt bond, and money market). The below-average, average, and above-average ranges reflect all cash flows during a five-year reference period, July 1, 2019–June 30, 2024. The gray area represents one standard deviation from the mean, the green area represents one to two standard deviations, and the black area represents more than two standard deviations. It is worth pointing out that mutual funds and ETFs governed by the Investment Company Act of 1940 are not a closed system. Cash flows can come from other structures, platforms, and sources such as bank deposits, separately managed accounts, and direct pension and sovereign wealth funds, among others.

Investment trends continued

In a continuation of two strong trends, investors in the 12 months ended June 30 favored:

  • Indexed ETFs over actively managed ETFs and traditional mutual funds, both indexed and active. The preference was especially pronounced among U.S. equity funds.
  • Money market funds over equity and bond funds. Investors added nearly $430 billion of net new assets to money market funds—more than twice the amount they committed to taxable bonds funds and nearly six times as much as their equity commitments. Still, money market funds’ 18.6% share of all ETF and mutual fund assets as of June 30 remained well below investors’ median 24.1% allocation since the beginning of 1993.

Beneath the fund-flow headlines

In addition to offering perspective on investor behavior across broad asset classes and fund types, our Risk Appetite Speedometers consider 100 sub-asset classes, durations, styles, sectors, and thematic investment categories. They present leaders and laggards across various periods based on both absolute dollar flows and cash flows as a percentage of beginning-of-period assets.

For additional details, read our 2024 Mid-Year Appetite Speedometers [12-page PDF]. 

Related links:

Notes:

All investing is subject to risk, including the possible loss of the money you invest.

Morningstar data ©2024 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

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