Investors Are Dumping These 2 Popular ETFs So Far This Year

Various ETFs have experienced an uptick in ETF outflows since the year began. Undoubtedly, the recent March correction driven by mounting tariff fears has pushed investors to take profits and rotate towards more defensive names. While it’s never a good idea to follow the herd out of any sectors or asset classes at a moment of peak fear, I do think that contrarian thinkers may have ample reasons to pick up stocks and ETFs that have quickly fallen out of favor.

Though it’s not necessarily a great way to determine where the value is at in any given time, I do think that it’s worth keeping up with what your average retail investor is doing, so you can spot opportunities to play the role of contrarian in an effort to get more value for your invested dollar.

In any case, here are three popular ETFs with recent outflows that could be worth adding to your buy watchlist. Of course, only time will tell if the flight to safety will continue going into the summer. Ultimately, it depends on what President Trump says (and does) on the front of tariffs. In an era of heightened fiscal uncertainty, it’s tempting to sell first and ask questions later.

Of course, when volatility and uncertainty surge, things feel riskier, but with lower valuations and emotions leading many to sell, it’s the potential rewards that stand to be somewhat higher.

Tariff-driven economic disturbance, inflation, and a Fed still cutting rates could lead many to uncharted territory. And while it seems like a hopeless situation, we found out last week that all it could take is a softer stance on tariffs or an increased willingness to backtrack to put the bull back in the driver’s seat. 

Without further ado, let’s look at two popular ETFs that have quickly fallen out of favor and could be tempting buys on weakness.

Schwab U.S. Dividend Equity ETF 

The Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) is a very high-quality mix of American dividend stocks. And it may come as a bit of a surprise to learn the ETF had faced significant outflows year to date. Despite the recent relief rally, investors still seem more than willing to “sell the rip,” with SCHD continuing to experience outflows.

Undoubtedly, the SCHD ought to be considered a bedrock core holding for many investors looking for a “smoother” and more yield-rich ride than the S&P 500. It’s an ETF that hits the spot on quality, yield (3.5% at writing), and lower beta (0.77), making it an ETF that investors should be rotating into, not out of, at a time of increased volatility.

Indeed, it’s not hard to imagine that investors heavily exposed to the “large value” category may find it better to be in bonds, CDs, annuities, gold, or some other asset for added stability. Sure, the SCHD may be a more bountiful, somewhat smoother ride, but it’s still an equity ETF, and it can fold if the broad market does in a recession scenario.

With shares down just over 5% from their all-time highs, the ETF is down about as much as the broader S&P 500. Despite the outflows, I’d rather be a buyer of the dip than a seller of the rip.

Invesco QQQ Trust

It’s perhaps less surprising to hear the Invesco QQQ Trust (NASDAQ:QQQ), which follows the Nasdaq 100, has been on the receiving end of investor outflows of late. It’s a risk-on play that’s overweight the Magnificent Seven names that have collectively underperformed the market year to date.

I wouldn’t throw in the towel on the Mag Seven cohort or any other hard-hit tech names as they stage a comeback from a bear market (yes, many of the high-growth tech names have already shed close to 20% from peak to trough).

In any case, the rush from the QQQ to bond funds feels almost palpable. If you’re a young investor, I’d much rather be in the QQQ than any sort of bond fund. You’re getting plenty of AI exposure, and while it’s going to be a wilder ride, such a tougher road could lead to greater spoils.

If this market correction turns into a bear market, the QQQ could easily shed some percentage more than the S&P 500. However, it also has more to gain if we’re limited to a 10% drawdown.

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