Follow Where All the Money's Going into the Market

According to the Investment Company Institute (ICI), year to date, investors have taken some $291 billion out of mutual funds and exchange-traded funds.

But that's not the whole story.

The ICI's numbers represent net flows, meaning there were inflows, but they were dwarfed by outflows.

The real story isn't about net outflows - it's about where the $108 billion that flowed into the market went, and how you can profit from that movement.

First, let's get one thing clear - I'm not interested in mutual funds, save for a few that I like and stand behind in my paid service, Money Map Report.

ETFs are much better investment vehicles. They're tradable all day (which means they're infinitely more "liquid" than mutual funds), they're cheaper than mutual funds, and there are thousands of specialty ETFs that mutual funds can't touch.

Now let's look at where the money went and how to follow it...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

Profit on These ETF Inflows

Year to date, $108 billion has been poured into ETFs, which we know courtesy of the ICI and one of my favorite sources, DATATREK, which broke the numbers down.

What's infinitely more interesting and telling, and which is what I'm here to tell you, is that almost all that money went into only 18 ETFs.

Most of it, $51.1 billion, or 47%, went into large-cap U.S. equity funds, the big funds with huge assets under management. Why? Because they're liquid, are they're index-following ETFs, and they contain the movers and shakers investors want to own.

A good chunk, $28.5 billion, or 25%, went into four fixed-income funds.

Two short-term Treasury funds that buy Treasury bills, SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (NYSEArca: BIL) and iShares Short Treasury Bond ETF (NYSEArca: SHV), took in $14.1 billion. The iShares 1-3 Year Treasury ETF (NASDAQ: SHY) took in $5.3 billion. And the iShares iBoxx$Investment Grade Corporate Bond ETF (NYSEArca: LQD) garnered $9.1 billion.

Three commodities funds gathered $19.4 billion, or 18% of the inflowing cash.

Together, the SPDR Gold Shares ETF (NYSEArca: GLD) and the iShares Gold Trust ETF (NYSEArca: IAU) grabbed $12.9 billion, and the U.S. Oil Fund LP (NYSEArca: USO) got $6.5 billion thrown at it.

The last 10% of the money went to Vanguard Total International Stock ETF (NASDAQ: VXUS), which took in $2.8 billion, iShares MSCI EAFE Growth ETF (NYSEArca: EFA), which took in $2.6B, and the iShares ESG MSCI USA ETF (NASDAQ: ESGU), which took in $5.2 billion.

Now, here's where the big bucks went:

Two giant S&P 500 tracking funds, Vanguard S&P 500 ETF (NYSEArca: VOO) and iShares Core S&P 500 ETF (NYSEArca: IVV), took in $18.3 billion.

Vanguard Total Stock Market ETF (NYSEArca: VTI) grabbed $9.8 billion.

Invesco QQQ Trust Series I ETF (NASDAQ: QQQ) garnered $9.3 billion.

Next up, the HealthCare Select SPDR ETF (NYSEArca: XLV) got $4.8 billion.

Vanguard's Mid Cap ETF (NYSEArca: VO) took in $3.4 billion.

And, not surprisingly, the Energy Select Sector SPDR ETF (NYSEArca: XLE) attracted $2.8 billion.

If you want to make money in this market, all those funds are worth following.

When more money gets allocated to the same big funds for all the right reasons, they're the funds with the leadership stocks that have bounced the best off the bottom and house the big tech darlings, or hold the healthcare stocks or the energy stocks that investors are bidding up, or are betting will bottom and bounce, in the case of energy.

At the same time, watching how this group trades when the market sells off is equally important.

Since a lot of money went into them, which helped lift the markets, that new money could take their profits and go to the sidelines.

If you see that happening, if the hot momentum ETFs falter and see heavy selling, then you know the rally's over and more selling will likely beget more selling.

The simple way to make money in this crazy market is by following the money.

Now you know where it's going and what to watch to see if it starts coming out again.

And in the meantime, don't forget to check out my colleague Tom Gentile's instant cash profit opportunity...

You see, Tom just dropped a brand-new way to see INSTANT CASH to the tune of $14,288 in his account, courtesy of Microsoft.

The catch? To start, he didn't buy or short Microsoft. He simply exploited a unique opportunity that exists in the markets right now. See it for yourself right here...

Follow Money Morning onFacebook and Twitter.

About the Author

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

Read full bio