2025 Year in Review: Is Wall Street No Longer Trading Stocks? 1,100 ETFs Absorb 1.4 Trillion

In 2025, Wall Street experienced a smoke-free revolution. Net inflows into the ETF market reached $1.4 trillion, surpassing the record set in 2024 by a full $300 billion. The annual trading volume hit an astonishing $57.9 trillion, with 1,100 new ETF products launched throughout the year. These figures signaled the end of an era: the era of stock picking based on “deeper research equals higher profits” is now history.

$57 Trillion Liquidity Tsunami

(Source: Bloomberg)

The most shocking data on Wall Street in 2025 isn’t the $1.4 trillion net inflow, but the $57.9 trillion annual trading volume. What does this number mean? On average, over $230 billion change hands in the ETF market every trading day, equivalent to the market capitalization of TSMC flowing daily. Such liquidity levels were unimaginable five years ago but have become the norm in 2025.

The explosion of liquidity reveals a fundamental shift in investor behavior. In the past, buying and selling individual stocks required consideration of bid-ask spreads, market depth, large order impacts, and more. But the liquidity in the ETF market now surpasses that of most individual stocks; even large orders of hundreds of millions of dollars can be executed instantly with minimal spreads. This liquidity advantage has accelerated institutional investors and high-net-worth individuals to shift from individual stocks to ETFs, because under the same risk exposure, ETFs offer better execution efficiency and lower trading costs.

More importantly, behind this $57.9 trillion trading volume is rapid iteration of investment strategies. The traditional “buy and hold” approach is no longer mainstream on Wall Street in 2025. Instead, tactical allocation—quickly switching between different themed ETFs based on market conditions—has taken over. When tech stocks overheat, investors switch to value ETFs; when volatility rises, they move to low-volatility ETFs. Such flexibility can only be achieved in a high-liquidity ETF market.

$1.4 Trillion Vote of Confidence

If the $57.9 trillion trading volume represents market activity, then the $1.4 trillion net inflow is a vote of confidence from investors, paid in real money. Where does this capital come from? Mainly three channels: large-scale redemptions from mutual funds, direct purchases by individual investors, and rebalancing of institutional asset allocations.

Mutual funds are experiencing unprecedented capital outflows. Throughout 2025, actively managed mutual funds saw net outflows exceeding $500 billion, most of which flowed into the ETF market. The reason is simple: mutual funds typically charge management fees between 1% and 2%, whereas ETFs usually charge less than 0.5%, with some index ETFs as low as 0.03%. Even more critically, data shows that over 80% of actively managed funds underperform the market over the long term. Why do investors still pay high fees to these so-called “experts”?

The awakening of individual investors is one of the most important trends on Wall Street in 2025. Retail investors who once stayed up late researching financial statements and calculating P/E ratios suddenly realize that their painstaking stock picks often underperform a simple S&P 500 ETF. Instead of wasting time on ineffective research, it’s better to buy ETFs directly to enjoy market-average returns, and use the saved time to create more value. This awakening is not about giving up but about rational resource allocation.

The shift among institutional investors is even more indicative. Pension funds, insurance companies, endowments, and other traditionally active management-dependent institutions have significantly increased their ETF allocations in 2025. The reason is that ETFs offer better transparency, lower costs, and more flexible tactical adjustments. When these giants managing trillions of dollars embrace ETFs, the market landscape has become irreversibly changed.

The Rise of Active ETFs

The biggest surprise on Wall Street in 2025 is the explosion of actively managed ETFs. If passive index ETFs are like “quick-frozen dumplings,” then active ETFs are “Michelin chef’s pre-made dishes.” These products bundle complex investment strategies into transparent, tradable products, allowing ordinary investors to access top-tier investment insights at very low costs.

Among the 1,100 new ETFs launched in 2025, over 40% are actively managed. These include hedge fund strategies, options strategies, dynamic allocation strategies, and other complex fields. For example, the “Zero-Day Expiration Options Volatility ETF” packages cutting-edge 0DTE options strategies into daily products, while the “Covered Call ETF” enables retail investors to easily implement enhanced income strategies similar to institutional investors.

Three New Investor Profiles on Wall Street in 2025

Allocation-focused Investors: Use core-satellite strategies, holding broad-based index ETFs as core, with thematic and strategic ETFs as satellites, aiming for steady excess returns

Tactical Traders: Rapidly switch between different themed ETFs based on market conditions, utilizing high liquidity for short-term swing trading, with an annual turnover rate exceeding 500%

AI-assisted Decision Makers: Use quantitative tools to screen ETFs, backtest historical performance, optimize allocation weights, and combine human judgment with machine calculations

Finally, these investor profiles represent the latest paradigm on Wall Street in 2025. When there are 1,100 ETFs to choose from, human intuition often fails. The rise of AI quantitative tools like AITO is no accident but a natural result of increasing market complexity. These tools can calmly backtest data, tell you which strategies have the highest win rate in current market conditions, and turn the anxiety of “choosing ETFs” into data-driven rational decisions.